Tax reform is on your donors' minds, avoiding "unrelated business activities," and lean into Make-a-Will Month

Conversation starters: Tax reform is on your donors’ minds

Changes to the tax laws always seem to be in the news in some way, shape, or form! And it’s hard to tell which provisions will ultimately become law and which ideas will simply fade away. Still, it is important to your fundraising and endowment-building efforts to stay on top of the proposals so that you are in tune with what your donors may be evaluating as they meet with their tax and estate planning advisors. 

For example, many high net-worth individuals and families are paying especially close attention to rumblings that a “wealth tax” may be on the horizon, which could mean that your donors will be even more open to tax planning and charitable giving discussions than they’ve been in recent years. While there is certainly no guarantee that this legislation (or any pending legislation, for that matter), will become law, the very existence of the discussion in Congressional circles alone can create opportunities for your organization and its donors.

Other tax law changes are swirling, too, making the next several months an unusually strong window of opportunity for donor engagement. Here are a few examples of tax law changes on the horizon, simply to give you a taste of what’s going on as you plan conversations with donors:   

–A version of the 2024 Federal budget proposes an increase in the top income tax rate from 37% to 39.6% 

–The IRS will step up efforts to enforce taxes, especially focused on high-income earners

–The estate tax exemption is slated to drop significantly at the end of 2025, which means a greater percentage of estates will be subject to tax

–Also in the mix is an expansion of the Net Investment Income Tax, such that it will affect more people

–A bonus, perhaps (?!?), is that the IRS will no longer make unannounced house calls!

… and the list goes on. 

Remember, you do not need to be an expert on tax law, and you do not need to know the details. You simply need to know that changes are coming, and your high net-worth donors and their advisors are watching carefully! 

Here are a few suggestions for opening up a dialogue with a donor using tax reform as a springboard:

–“I’d be curious to know what your advisors are saying about all of the changes coming to the tax laws! Next time you meet with them, you might ask them how increasing your charitable giving could help offset the impact of the new laws on your finances.”

–“All of this talk about tax reform, especially changes coming to the estate and gift tax, has prompted many donors to take a look at their wills, trusts, and beneficiary designations to ensure that their charitable provisions are intact and working the way they intend. That’s something worth considering discussing with your attorney, especially as we continue to talk about your potential legacy gift to our organization’s endowment fund at the community foundation.”

–“We’d love for you to consider increasing your annual contributions to our permanent funds. We work closely with the community foundation, which holds our accounts, and I am sure they would be glad to help us explore ways your generous support of our mission could actually help you with your tax bill, too. It sounds like those new laws are going to be a beast!”

As always, the community foundation is here for you! We enjoy brainstorming conversation starters to help you engage in productive dialogue with your donors–whether or not tax reform is on the horizon, and especially when it is! This is a perfect time to step up your endowment-building efforts. 

Pay close attention to “unrelated” business activities

Watch out for activities that might cause your organization to inadvertently break the rules for qualifying under Internal Revenue Code Section 501(c)(3). That would be a major bummer, to say the least. 

The IRS’s recent publication does a nice job of explaining the history and meaning of “unrelated trade or business” in the context of a nonprofit organization’s exemption. The term “unrelated trade or business” refers to “any trade or business, the conduct of which isn’t substantially related (aside from the need of such organization for income or funds or the use it makes of the profits derived).” This is a critical concept in the doctrine governing charitable organizations, and it’s well worth a glance. You may even want to circulate the publication to your board members to skim, just so they can get a feel for the complexity you and your team deal with on a daily basis. 

Lean into an opportunity!

Don’t miss an opportunity this month to get the word out about planned gifts to your endowment! August is Make-a-Will Month, and you can capitalize on the buzz by making sure to share stories of impact and techniques for donors to support your organization through their estates. 

Remind your donors that bequests can include provisions in a will or trust, or they can take the form of a beneficiary designation (especially on a donor’s IRA or other qualified retirement plan where tax savings can be big if the donor names a charitable beneficiary). 

As always, the community foundation is here to help as you work with your donors to leave a legacy to your endowment fund, thereby helping to ensure that your organization’s mission can continue for generations. 

Growing your endowment with stock gifts

Stock gifts made easy as you grow your endowment

Giving appreciated stock is an excellent way for your donors to support your endowment because the donor can avoid the capital gains tax, resulting in a larger endowment gift than if the donor had sold the stock, paid the tax, and then transferred what was left of the proceeds to your endowment.

As a charitable organization committed to growing your endowment, you no doubt work with donors who vary by age, experience, capability, willingness and more. But while you want to help them support your mission in any way you can, the demands of your day-to-day work may make it difficult to handhold each of them as they get into the details of fulfilling a commitment to make a gift of stock. 

Furthermore, many donors hear about giving stock to charitable organizations through the mainstream media. Even so, it might still sound like a lot of work to them and, in addition, it does actually require a lot of work on your part, which can add even more strain to an already taxed fundraising staff. 

This is where the community foundation can help! Our team is happy to work with you and your donors to make gifts of appreciated stock to your endowment fund at the community foundation. We’ll help the donor transfer the stock, including helping the donor track down all necessary documentation. We can also jump in to help determine the value of the donation so that the donor can properly report the donation on the donor’s tax return. And our team will handle selling the stock and investing the proceeds according to the terms of your endowment fund here at the community foundation. As always, our team will handle proper tax acknowledgment of the gift, and we will capture the gift in the quarterly statements for your endowment fund.

We know that you intend to do everything you can to grow your endowment, even in challenging economic times. That’s why we are happy to take some of the heavy lifting off your plate. It is our honor and pleasure to work with you and your donors to help grow your endowment to fulfill your mission for years to come and help people in our community for generations. 

Inspiration for growth is a silver lining in philanthropy’s 2022 results

For only the fourth time in its history, Giving USA reported a rare decline in overall charitable giving in the United States. In 2022, Americans gave 3.4% less to nonprofit organizations than they did in 2021. Still, total giving reached nearly $500 billion, even though this number was dampened by stock market declines and inflation. 

Certainly financial pressures at the individual household level contributed to the decline. In 2022, 64% of giving came from individual donors, but individuals’ portion of the overall giving pie has declined over the last decade with fewer households overall giving to charity in recent years.   

It’s worth considering, if individual giving is so low, is there an opportunity for charitable organizations to double down on efforts to encourage individual giving–especially planned gifts to organizations’ endowment funds at the community foundation? Perhaps! 

Here are a few ideas for your organization to consider as you begin to build your strategies for year-end giving and endowment building. 

Tap into the empathy factor

Though the CDC declared the Covid-19 pandemic over as of May 11, 2023, those of us who work in the nonprofit sector hope the lessons about empathy and human connection will continue indefinitely. Consider sharing the Giving USA statistics with your donor base. Many donors appreciate the macroeconomic view of philanthropy and may be motivated to increase their giving when they understand the magnitude of the drop in individual giving and how it affects charities’ ability to serve the community they love.

Review the benefits of planned giving

Times may be tough now, but setting up a bequest to your organization’s endowment fund at the community foundation or arranging for another type of planned gift, such as an IRA beneficiary designation, does not impact a donor’s wallet today. Instead, these future gifts flow from a donor’s estate at death and are an important source of permanent funds to help the organization’s mission stay strong for many years. 

Encourage donors to review their stock portfolios for appreciated assets

Even in a market downturn, not all stock is down! Your donors can make gifts of highly-appreciated stock to their endowment funds at the community foundation and avoid the capital gains tax, thereby giving your organization even more security for its future than if the donor would have sold the stock, paid the tax, and given the rest of the proceeds. 

Our team is always happy to help you and your team build strategies to grow your endowment fund at the community foundation. We are here for you and the people you serve, now and in the future.

Summer giving trends

Giving at check out

Yes, fundraising is a numbers game, and you have to make a lot of asks to reach your goals, But it’s possible to take it too far, as some charities are learning when they dip into the cash register too many times. 

Influencer philanthropy may be a double-edged sword

Has the influencer culture made its way into philanthropy for good? Some might think so, based on the fundraising success of MrBeast. But the approach is not without controversy, largely because charities face the same challenges working with influencers as those faced by for-profit businesses.

Charitable giving is getting a year-round boost

Charitable giving is not just for fourth-quarter holidays. More donors and charities are identifying opportunities throughout the year to celebrate an occasion by incorporating gifts to charity and charitable causes. It’s worth considering for your next fundraising campaign!

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Planning for 2025, a summer boost for your endowment, and protecting your exemption

What goes up may come down: Start now to plan for 2025

Many of your donors who are now retiring may still vividly remember the Federal estate and gift tax framework that was in place decades ago. Consider a 75-year-old donor who, in 2023, is making plans to leave a bequest to your organization’s endowment fund at the community foundation. When that donor was 45, and perhaps even experiencing meaningful wealth for the first time, the potential taxability of estates was a big issue. In 1993, for example, this hypothetical donor could give away, during the donor’s lifetime or at death (or a combination of the two), a total of $600,000 to family members and loved ones without triggering Federal estate or gift tax. Everything above that $600,000 “exemption” amount was subject to tax, then at a top rate of 55%, unless certain deductions applied. One of these deductions, of course, was (and still is) the charitable deduction. Because estate and gift taxes were so high back then, many donors routinely established charitable bequests to relieve the tax burden and support favorite causes.  

Historical perspective is important here, because many of your long-term donors have no doubt watched the estate tax with keen interest over the years. From $600,000 in 1993 (and a top tax rate of 55%), the exemption rose to $675,000 in 2001 (still with a top rate of 55%). By 2006, the exemption stood at $2 million, with a top rate of 46%. Several more increases to the exemption followed, until the exemption more than doubled to exceed $11 million in 2018 under the Tax Cuts and Jobs Act of 2017. Fast forward to 2023, and the exemption is $12.92 million per individual ($25.84 million for a married couple). This means a married couple can transfer almost $26 million to family members and other beneficiaries without incurring federal estate or gift tax.

Fundraising strategies have changed along with the exemption. Back in 2001, for example, when the exemption was $675,000, charities could educate donors whose assets totaled more than $675,000 about the benefits of leaving the bulk of their above-exemption estates to charity, rather than letting up to half of it go to the federal government. Today, the estate tax conversation is most effective with donors whose estates exceed nearly $13 million. That is a big reduction in the size of the pool of affected donors! It is easy to see why donor interest in tax-motivated charitable bequests began to decrease. Although donors continued to leave substantial estate gifts to charities, a lot of the tax incentive for doing so has been eroding. 

Change may be coming, though. Barring legislation that extends the tax cuts, the Federal estate and gift tax exemption, in a case of “what goes up must come down,” is scheduled via sunset provisions to significantly drop in 2025, by about half. If this does occur, the change will most certainly increase the number of your donors who are facing the potential of incurring significant estate and gift taxes on the transfer of assets to family members and loved ones. The upshot here is that it soon may be time to again talk with many of your donors–not just a select few–about the benefits of leaving a bequest to your organization, whether to your endowment fund at the community foundation or otherwise.  

Here are a few fundraising tools that may be worth sharpening as you prepare for potential changes in 2025: 

–The specter of a sunset is becoming a popular topic of conversation. Regardless of the estate tax exemption amount and what may or may not happen in 2025, the exemption’s potentially-changing status is reason enough to strike up a conversation with a donor about bequests. To be sure, anytime there are potential changes in tax laws swirling around, you have an excellent opportunity to discuss planned giving with your donors. 

–On the flip side, as you talk with donors who think legislation will intervene and therefore believe the exemption will not drop back down, keep an ear to the ground for those among them who may have purchased life insurance policies during the low-exemption years as a source of liquidity to pay estate taxes. Donors who don’t reasonably expect their estates to be taxable can name a charity as the life insurance beneficiary. For example, a donor could name your organization’s endowment fund at the community foundation as the beneficiary of the policy, or even name a designated fund at the community foundation as beneficiary and then the community foundation could distribute the proceeds to your organization and other charities the donor wants to support. 

–Remember that annual exclusion gifts may again become hyper relevant. Back in the low exemption days, a donor did everything possible to remove assets from the donor’s estate without eating into the donor’s Federal estate and gift tax exemption. Years ago, the annual exclusion maximum was $10,000 per person, meaning a donor could give up to $10,000 annually to each child, grandchild, or other beneficiary and still keep the full exemption intact. So, in the late nineties, for example, a donor could essentially remove $100,000 from the donor’s taxable estate every year by giving $10,000 to each of 10 children and grandchildren. Because the exemption is so high right now, a smaller percentage of your donors are likely taking advantage of these annual exclusion gifts using the now inflation-adjusted annual exclusion amount of $17,000 for 2023. What’s important for you to know, though, as you are raising funds for your organization, is that your donors may be rebooting their annual giving habits if the tax cuts do in fact sunset in 2025. It is a good idea for you to think about how to make the case that your organization is a worthy recipient alongside family members for regular annual gifts and should become part of that regular giving habit. 

Though relatively few financial certainties exist, especially where tax laws are concerned, what we do know is that you and other charitable organizations have plenty of time to plan, strategize, and consult the team at the community foundation about how fundraising and endowment-building strategies might change for 2025 and beyond. 

Give your endowment a summer boost 

The summer months are typically slow, but if ever there were a summer to step up your fundraising efforts–especially efforts to grow your endowment or reserve funds–this would be the summer to do it. That’s because new research points to a lack of awareness that the percentage of Americans giving to charities has noticeably declined in recent years. Indeed, only one in three people is aware of this decline, according to the survey. What’s perhaps even more surprising is that people who are actually giving to charity did not demonstrate a significantly higher likelihood of awareness about this trend, as compared with non-givers. This is especially eyebrow-raising because the topic has been covered heavily in the media, including in mainstream publications. 

This rather dismaying situation does, however, create an opportunity for your organization to get the word out. Here are a few tips for ways you can inform your donor base and encourage them to step up.

–Consider actively sharing the recent study on your blog and social media channels. Invite readers to learn more about how they can help the community by getting involved with your organization.

–Send out a special communication to your donor base with a summary of the study and offer concrete ways for donors to help your organization, such as increasing their annual giving levels, considering a planned gift, or talking with your team about supporting your endowment or reserve fund at the community foundation. 

–Report on your success to your donor base. Donors love to hear that they have made a difference, especially when they join an overall effort of your organization to move to the next level. When you show donors at the end of the summer that the number of donors giving to your organization has increased, bucking the national trend, they will be so happy they were part of the success! 

We look forward to talking with you about how to maximize your fundraising and endowment-building opportunities, even in a challenging year! 

Protect your exemption

A recent private letter ruling reinforced once again that the IRS takes the concept of “private inurement” very seriously for nonprofits. As in, if you do it, you’re out. Most nonprofits are well aware that they will be putting their 501(c)(3) exemption status at risk if they play fast and loose with the rules for preventing undue benefit to a private person. After all, charities are established for the public good, and public good and private profit do not mix.

Take note of this potential pitfall as you work with your advisors, board members and colleagues to establish policies and procedures at your organization. Please reach out to the community foundation anytime. We are happy to help clarify what these rules mean and how you can keep your organization compliant and your mission safe.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  

Asking about donor-advised funds, leveraging bunching, and recommended reading

Bunching: Help your donors help you

As every nonprofit leader is no doubt aware, the rules for charitable deductions have changed over the last few years. The charitable contribution deduction is available only to taxpayers who itemize deductions, and because the standard deduction recently increased, many charities have seen a reduction in the number of donations and are rallying for legislation to help bring donors back.

Indeed, the standard deduction hike effective for tax years starting in 2018 has reduced the numbers of smaller-dollar donations, fulfilling many fundraisers’ fears. Some donors, however, are wisely leveraging a partial workaround. By using a tax-smart method known as “bunching,” many donors are recouping at least some of the missing tax benefits of their charitable contributions. 

Now more than ever it is critical for nonprofit leaders to understand the concept of bunching and how it can help their donors provide steady financial support, despite less-than-ideal tax laws. 

A brief history of the standard deduction is instructive.

• Beginning in 1944, the Internal Revenue Code provided for a 10% allowance from income to determine taxpayers’ liability (if only it were that simple now!).

• 1974 was the last year the standard deduction ($1,300 that year) was the same for single and joint filers. Compared to single filers, joint filers had less than a 2:1 standard deduction ratio until 2003.

• The standard deduction has typically increased each year by an amount somewhere between $50 to $300, reaching $6,350 (single filers) and $12,700 (joint filers) in 2017.

• In 2018, the standard deduction jumped to $12,000 (single filers) and $24,000 (joint filers), and the deduction has been indexed for inflation each year since then.

It’s not hard to see why the incentive to make smaller donations has been reduced so dramatically in the last four years! 

The technique known as bunching (sometimes called “bundling”) means a taxpayer aggregates multiple years of charitable donations into one year to deliberately exceed the standard deduction. For 2023, the standard deduction is $13,850 for single filers and $27,700 for joint filers. So, a couple who uses bunching to donate to your organization would give enough so that their total itemized deductions add up to more than $27,700 for this year. For example, if that couple typically gives your organization $10,000 per year, they could give $30,000 right now to take advantage of itemizing deductions. This is especially helpful to a donor who is having a relatively high-income year.

Keep these two items in mind:

The higher standard deduction is set to expire at the end of 2025. Without legislation extending the sunset date or making the provisions permanent, the standard deduction will drop back down. This will change the dynamics for your donors.

If a donor is reluctant to make multiple years of gifts directly to your organization up front, you still have options. Talk with the community foundation about working with the donor to establish a designated fund at the community foundation, such that the donor can make multiple years’ worth of gifts up front but avoid the risk if something very unexpected were to cause your organization to become financially unstable.  

Here are a few ways your donors can “bunch”:

Give cash

Cash is easy for a door to give in a year of surprise or higher-than-expected income. If a donor earned a bonus, received a significant raise, took a job buyout or had a significant liquidity event, surplus income could make bunching ideal. Keep an eye out for donors who may be in these situations so you can strike up the conversation.

Appreciated stock

Donating highly-appreciated marketable securities is extremely tax efficient. Stock given to a public charity typically is deductible at the asset’s fair market value. Your charity, in turn, pays no capital gains tax on its sale of the asset, thereby generating more dollars to support your organization than you would have received if the donor had sold the stock and given the proceeds to your organization. Yes, the benefits of giving highly-appreciated stock are second nature to those of us who work in philanthropy every day. Remember, though, that your donors do not work in philanthropy every day and it is truly worth it to always mention this giving technique. 

Real estate

As with gifts of other long-term appreciated assets, a donor’s gift of real estate avoids capital gains taxes and generates more money for your mission than if the donor had sold the property and donated the proceeds. Reach out to the community foundation for assistance when your donor would like to benefit your organization as well as others, or if your organization is not set up to accept real estate or other complex assets. We can help! 

Learn more about donor-advised funds

Charitably-inclined individuals and families have many options for organizing their charitable giving. The community foundation works with a wide range of donors to help them establish a charitable giving plan to ensure that they can maximize their support of the causes they love.

The community foundation works with a donor to establish a fund that will best meet the donor’s needs and goals. Sometimes a donor establishes a designated fund to support one or more favorite charities. Donors also sometimes establish endowment funds to support a favorite charity. Field-of-interest funds are also popular to enable a donor to support a particular cause or address a specific community need over time. 

Donor-advised funds are a popular fund because they give donors ease and flexibility without the administrative and tax hurdles of establishing a private foundation. Because of their flexibility and tax benefits, donor-advised funds frequently capture philanthropic dollars that otherwise would be left on the table, thereby increasing the overall amount of money available to your organization and other nonprofits in the community. This happens a lot when a donor wants to give real estate or a closely-held business to charitable causes, or even a large block of publicly-traded stock.

To learn more about how donors are currently viewing charitable giving in general, and the extent to which donors are aware of donor-advised funds (half of donors are familiar with the vehicle!), we recommend checking out the results of a recent study addressing charitable giving and transparency.

Above all, if you have any questions about how the community foundation works with donors through donor-advised funds and other vehicles to support your organization and others in the community, please ask! We invite you to reach out and we look forward to the conversation.

Worth a peek

Our team is dedicated to staying up-to-date with the latest trends in charitable giving. Here are a few of our team’s picks for deeper reading that may be of particular interest to nonprofit leaders. 

The most recently-revised Code of Governance for charities is worth reviewing as a quick check-in as you review your board governance priorities. Nothing is a surprise; rather, the Code validates what high-performing organizations are already doing.  

Generational differences in giving are illuminated in this recent study. Millennials are now giving more than Gen Xers! In other research results, volunteerism continues to emerge as an important factor to engage donors. 

Many nonprofits are predicting a tough fundraising year, and that adds to the stress of declining revenues and increasing demands on charities’ budgets. Now is not the time to give up on fundraising, though. More than ever, charities need to stay focused on engaging donors in the organization’s important work.

Bank sector unease, investment level-set, pending legislation, and donor-advised funds

Banking sector unease may signal the need for an investment level-set

While arguably the recent collapse of Silicon Valley Bank sent its biggest shockwaves through the start up and banking sectors, nonprofit organizations are not immune from the ramifications. Charitable organizations’ concerns range from specific worries that the bank’s successors will reduce or stop lending and support for affordable housing and community programming initiatives, to wide-ranging uneasiness throughout the broader nonprofit sector about the safety of money held in banking institutions across the country.  

Indeed, a nonprofit’s accounts at a bank are subject to the same FDIC rules as a for-profit company, with a few additional twists that could allow a nonprofit to diversify. Finance committee members on your board of directors certainly are aware of this and may be encouraging the rest of the board and staff leadership to review your organization’s reserve fund policies and even check in on your organization’s endowment practices.

If your organization has already established a reserve fund or endowment fund here at the community foundation, you know that the community foundation is committed to helping you meet the needs of the people you serve for the long term. 

Here are a few reminders about how the community foundation team partners with you and your board of directors to keep your funds safe and supporting your mission:

–A fund at the community foundation is a cost-effective option for a nonprofit to access investment options that might not otherwise be available. Overseen by an independent board of directors made up of community leaders, the community foundation is built to provide the highest level of investment oversight. 

–The community foundation can help your organization structure and accept gifts of real estate and other hard-to-value assets.

–By having a fund at the community foundation, our team can step in as your behind-the-scenes back office, giving your board and staff more time to focus on your programs and donors.

–The team at the community foundation is adept at navigating the specific accounting standards that are unique to complex fund accounting and gift planning.

–The community foundation team can help establish investment policies and gift acceptance policies, making it easier for you to engage in fundraising discussions and have the time to do it. 

As always, the community foundation is here to help. Our tools and services make it easier for you to grow your reserve funds and endowments. We look forward to continuing to work together.

Proposed legislation could rescue charitable giving incentives

Recently-proposed federal legislation could help nonprofit organizations recoup some of the annual donations they might have lost when the standard deduction increased a few years ago, causing a wide swath of taxpayers to stop itemizing deductions and thereby erasing tax benefits for many charitable contributions. Known as the Charitable Act, the 2023 proposed legislation would allow non-itemizers to deduct up to one-third of the applicable standard deduction. 

To be sure, the increased standard deduction included in the Tax Cuts and Jobs Act of 2017 was no minor tweak to the law. Tens of millions fewer households itemized their deductions in the years following the increased standard deduction. That’s a lot of people who suddenly lost part of the incentive to make charitable gifts. The Charitable Act would strive to alleviate some of the negative impact on charities.

In addition, the “universal charitable deduction” may be back on the table. In general, taxpayers like the idea of additional charitable deduction opportunities, with 42 million taxpayers taking advantage of the $300 "universal" charitable deduction offered in 2020, and 24% of those having gross income of less than $30,000. That opportunity was extended in 2021 but discontinued for 2022. Consistent with those findings, polls show strong support for restoring the universal charitable deduction.

The team at the community foundation is watching this legislation closely. We will keep you informed! 

Donor-advised funds, unlocking charitable gifts, and the private foundation connection 

Many nonprofit organizations are familiar with donor-advised funds, in part because donors frequently use their donor-advised funds to support the organization. In fact, you and your team are probably familiar with the checks that come from the community foundation via donors’ grant recommendations, which in turn trigger the community foundation to issue checks to you from these donors’ donor-advised funds. 

Donor-advised funds have become increasingly popular and are frequently featured in the media. But donor-advised funds are not new. First deployed as a charitable giving technique in the 1930s, long before their popularity ascended in the 1990s, usage of these vehicles to organize charitable giving has recently reached record highs.

An individual or family often establishes a donor-advised fund at the community foundation as a tax-savvy, efficient alternative to a private foundation. A donor-advised fund at the community foundation, for example, can save donors the time and expense of administration and also allow the donors to contribute highly-appreciated assets, such as real estate and closely-held stock, to charitable causes and be eligible for deductibility at the assets’ fair market value. This is not the case with gifts of nonmarketable assets to private foundations, which typically are deductible at the donor’s cost basis. 

One of the reasons donor-advised funds have been in the news lately is because proposed legislation aims to change the way contributions to donor-advised funds by private foundations are treated. Under current laws, private foundations can make contributions to donor-advised funds under the same rules that govern contributions to donor-advised funds by individuals, in that the funds are not subject to any particular timing requirements to be distributed to charities. (It is important to note that, despite the lack of a formal pay-out requirement, the 10-year average aggregate pay-out rate from all donor-advised funds is a whopping 22.2%, and the 2021 aggregate pay-out rate was a record 27.3%. Donor-advised fund donors tend to be very active in supporting their favorite organizations!)  

By contrast, private foundations are subject to a 5% annual distribution rule. Under proposed legislation (see page 139 of the Treasury’s explanation document), while it would not affect contributions to donor-advised funds by individuals, contributions to donor-advised funds by private foundations would need to be distributed “by the end of the following taxable year,” and documented as such, to qualify for the 5% private foundation distribution requirement. 

Time will tell whether these proposed changes make it into law.

Overall, donor-advised funds established at the community foundation can help donors organize their giving, making it easier for them to keep track of the support they give to your organization and their other favorite charities. In many cases, donors who establish a donor-advised fund are able to unlock long-term capital gains property and deploy it toward charitable purposes at much greater financial levels and with more administrative efficiency than would have been possible without going through a donor-advised fund.

We encourage you to reach out to the team at the community foundation with your questions about donor-advised funds and how your organization can gain a better understanding of how these vehicles help engage donors and grow philanthropy in our community. As always, we are here to help you achieve your mission, now and in the future!

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  

Engaging your board in planned giving, building donor trust, and avoiding slip ups with gifts of alternative assets

Checklist: Engaging your board of directors in planned giving

Now that the year-end dust has settled after a busy first couple months of the new year, your organization’s attention may turn to getting serious about fundraising, and especially making sure your planned giving strategies are well underway. It is not unusual for planned giving conversations to start six months or more before a gift is inked. And, of course, the fourth quarter is when many of your donors want to wrap things up with charitable remainder trusts, large endowment gifts, and even bequests. If you do the math, that means you have to start now!

Now is also the time to start involving your board members in fundraising efforts if fundraising is part of your 2023 board engagement plan. Remind your board members that your organization can accept many types of assets into its endowment or reserve fund at the community foundation. No doubt you’ve shared this information with your board members at several points over the years, but planned giving is not top of mind for your directors and a reminder at least annually is always wise. 

Here’s a checklist you can share with your board of directors to help them spot situations where your organization and the community foundation can work together to secure a meaningful gift.

Cash

Cash is always a welcome gift to your organization, even if not the most tax-efficient. For taxpayers who itemize, dollars are deductible up to 60% of adjusted gross income and excess deductions can be carried over and deducted for five years. Related, a donor-advised fund or a designated fund at the community foundation can help a donor maximize an up-front charitable tax deduction, with the dollars flowing to your organization and other charities over a period of years. 

Highly-appreciated stocks and other investments

Giving publicly-traded stocks and bonds is a tax-effective way for a donor to support your organization's endowment or reserve fund at the community foundation because capital gains tax can be avoided on the appreciation and the gift is deductible at fair market value. 

Qualified plans

Whether via a Qualified Charitable Distribution ("QCD") by a donor who is over 70 1/2 years old, or through a bequest via a beneficiary designation, a qualified retirement plan can be an effective asset for charitable giving. Gifts of retirement plan assets through a QCD or bequest are not subject to income tax. The assets are also removed from the donor's estate for estate tax purposes.

Alternative assets

Real estate, closely-held business interests, collectibles, and other nontraditional "alternative" assets frequently can deliver strong tax benefits when given to a public charity such as your organization's fund at the community foundation. The proceeds from the sale will support your organization according to the terms of your organization's endowment or reserve fund. Sometimes, a donor may use a donor-advised fund at the community foundation to ensure that the proceeds from such a sale can support several organizations, including yours. This technique can unlock gifts from donors who want to support multiple charities with the gift of a single alternative asset.

In summary, encourage your board members not to underestimate the range of property your organization can receive when you collaborate with the community foundation to accept a wide variety of gifts, administer their sale, and disburse charitable dollars toward your mission according to a donor’s wishes.

The trust factor: Building donor confidence in your mission

At the core of any fundraising program, especially those programs designed to build your endowment or reserve fund at the community foundation, is the all-important factor of trust. Unfortunately, recent studies have shown that donor trust in nonprofit organizations may be waning. But that doesn’t mean your organization has to be part of this trend.

Here are three suggestions for boosting donor trust in your organization’s ability to deliver on its mission over the long-term.

Get donors involved now

As you and your team encourage donors to include your organization in their estate plans, consider also helping your donors make meaningful contributions during their lifetimes. Donor engagement is one of the best ways to build trust and confidence in the effectiveness of the services your organization provides to the community. Lifetime gifts–leading up to a planned gift–help legacy donors see the results of their gifts. Donors can also get involved as volunteers, board members, or even as observers at a site visit to your organization. 

Invite the next generation

Donors who are planning to leave a planned gift to your endowment at the community foundation by definition are already taking steps to establish a legacy. Many of these donors will likely welcome the opportunity to involve their children and grandchildren with your organization. Consider encouraging your legacy donors to invite other family members to your organization’s briefings, annual events, and fundraisers. Your team's relationships across generations will go a long way to establishing trust with a legacy donor’s family.

Show gratitude and celebrate results

As the year progresses, find creative ways to keep your donors informed about your mission and your team’s accomplishments. Get up to speed on how donors make decisions. Donors want to give to the aspects of your programs that are important to them, and they want to understand how their gifts are making a difference. Build trust with donors by starting every conversation with thanking them for their gifts to date and showing them what those gifts have achieved. 

Gifts of alternative assets: Avoid valuation slip ups

Giving highly-appreciated assets to a public charity, such as your endowment or reserve fund at the community foundation, is a great way for your donors to support your mission. But time and again, we are reminded of the critical importance of following the IRS’s rules for documenting these gifts and securing the charitable deduction when those gifts take the form of highly-appreciated, non-marketable assets such as real estate, closely-held stock, and artwork, all of which are sometimes referred to as “alternative assets.” 

Many planned giving professionals are still talking about the news of a Tax Court decision late last year to disallow a $600,000 charitable tax deduction because the taxpayer failed to secure a proper appraisal. Filing a proper Form 8283 seems like a no-brainer because it is mentioned constantly in charitable giving literature. Unfortunately, some taxpayers are still not getting the message. That was the case with a gift of artwork in Heinrich C. Schweizer v. Commissioner, a cautionary tale of what can go wrong–and how expensive it can be–when a donor (in this case, a donor who even worked at Sotheby’s), fails to follow the tax rules and obtain a qualified appraisal.

Please reach out to the community foundation when you are talking with donors about gifts of alternative assets. We will be happy to help you work with the donor and the donor’s tax advisors to ensure that a gift of an alternative asset to your organization’s endowment or reserve fund at the community foundation is properly documented and reported so that the donor can benefit from a tax deduction as well as from the satisfaction of knowing that your organization’s mission is stronger thanks to the gift.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  

Endowments and assets donors can contribute, plus the reality that hybrid events may be here to stay

Preparing for the future: It’s easier with an endowment 

The gold standard for many nonprofits whose missions are critical to our society is the ability to provide reliable services to the people who are counting on them, regardless of economic ups and downs. This is especially true in the wake of weather-related and other natural disasters, and even man-made tragedies, that create community upheaval. In the face of the sheer unpredictability of when community needs might escalate, it’s often hard for a nonprofit organization’s board and staff to balance fundraising for long-term security on one hand, with generating enough funding to support the organization’s operating budget from year to year on the other hand.

To protect against economic ups and downs, and also to be prepared in the event that a disaster or tragedy hits their community, many nonprofits build and maintain a financial cushion. Sometimes this takes the form of a rainy day fund or reserve fund, which can be accessed by the nonprofit’s board and staff to fill the gaps in budget shortfalls. Many organizations, in addition to building reserve funds, establish formal endowments to help ensure that the organization can meet its mission for years to come. Endowments are designed so that the corpus is preserved and increases in value over the years. Interest earned is used by the nonprofit only according to the stated purpose of the endowment. 

Donors are often interested in learning the best ways to structure their gifts to a favorite nonprofit’s endowment to leave a community legacy that will live on for generations. Known as “donor-permanently-restricted gifts” under the Uniform Prudent Management of Institutional Funds Act, or UPMIFA, these donations are subject to specific record-keeping and investment requirements by the nonprofit to preserve the donor intent of these gifts. 

Donors may not always realize the flexibility they have in structuring gifts to nonprofit endowments, even with the heavy requirements. A prime example of a key donor decision is whether to make a lifetime gift to an endowment or leave a gift to an endowment through a bequest. In either case, the funds flowing to the endowment will be restricted and used only according to endowment rules and the policies set by the nonprofit’s board. Keep these factors in mind when evaluating the timing of an endowment gift:

A lifetime gift to an endowment allows the donor to enjoy recognition for making the gift, including naming rights opportunities, and perhaps even participate in the nonprofit’s fundraising committees to encourage other donors to follow suit.

Giving to an endowment during a donor’s lifetime means that the donor can take advantage of giving highly-appreciated assets and benefiting from possible income tax deductions. And of course, the gifted assets are removed from the donor’s estate for estate tax purposes if that is projected to be an issue down the line.

A bequest to a nonprofit endowment, on the other hand, gives the donor the flexibility to fund the gift through beneficiary designations of life insurance policies, or, better yet, qualified retirement plans that would be subject to both estate tax and income tax following the donor’s death. All taxes are avoided on retirement assets that flow directly to a qualified charity through a beneficiary designation. 

Even donors who are financially secure sometimes worry about running out of money. Leaving a bequest to an endowment may give them peace of mind that they will own their assets until they die, and they can change the bequest any time they want while they are living if charitable or family priorities shift along the way.

Please reach out to the team at the community foundation with your endowment-related questions. We are dedicated to honoring donor intent and doing everything we can to help nonprofits stay strong for the people who count on them.

Fundraising checklist: Many assets make great gifts 

The Qualified Charitable Distribution (QCD) is creating quite the buzz in the nonprofit sector! Through a QCD, a donor who has reached the age of 70 ½ may be eligible to make annual distributions of up to $100,000 from IRAs directly to a qualifying public charity. As you no doubt are aware, in December 2022, Congress passed new laws that codified the much-anticipated Legacy IRA. The Legacy IRA expands the QCD to allow a donor to make a one-time, $50,000 QCD to a split-interest vehicle such as a charitable gift annuity or charitable remainder trust. The new law also indexes the QCD cap for inflation in future years.   

With the QCD now top of mind for many of your donors, now is a great time to review the various assets that your donors can give to support your mission–especially your endowment and reserve funds. The community foundation can help you facilitate complex gifts and meet your donors’ desire to both support your mission and maximize their own tax and estate planning goals. 

For example, highly-appreciated, publicly-traded securities are tax-effective gifts to your organization, especially because the donor’s capital gains tax can be avoided. 

In addition to giving through an IRA via a QCD, giving via a bequest of an IRA or other qualified retirement plan using a beneficiary designation is an excellent charitable giving technique because the donor avoids both income and estate tax on the retirement plan assets flowing to charity.

In addition, real estate, closely-held business interests, collectibles, and other nontraditional assets can frequently come with strong tax benefits when given to a public charity such as your organization or to a fund at the community foundation. The proceeds from the sale can support your nonprofit, or, when the donor uses a fund at the community foundation, the proceeds can even support several organizations, including yours, if that’s what the donor intends.

And of course, donors can give cash. For donors who itemize deductions on their tax returns, dollars given to public charities are deductible up to 60% of adjusted gross income and excess deductions can be carried over and deducted in five future tax years. Related, a donor-advised fund at the community foundation can help a donor maximize an up-front charitable tax deduction, with the dollars flowing to your organization and other charities over a period of years. 

Forever changed? Why hybrid fundraisers may be here to stay

Though the pandemic and its accompanying restrictions have eased, many innovations from that time have a bright and beneficial future. This is especially true when considering ways to build your endowment at the community foundation.

Take hybrid-style fundraisers, for example. Though mail and digital campaigns had long been used to complement or even substitute for in-person events, the simultaneous execution of online and offline events was hardly a pre-pandemic consideration. Yet, first virtual, and then hybrid events, soon became a necessity.

What’s more, many donors enjoyed the hybrid setup. It alleviated fears about in-person attendance while providing a sense of belonging through participation. This was especially true for legacy and well-intentioned donors with limited mobility or other means to attend a traditional-style event, not to mention the near-infinite reach of digital. And while “annual” events make for nice one-time gifts, hybrid events with their digital capabilities offer donors new opportunities to make automatically recurring gifts.

For these and other reasons, hybrid-style events quickly gained speed as a way to capture or maintain anticipated revenue. Just 12 months into the pandemic—in April 2021—studies showed that more than twice the number of surveyed respondents who’d planned to hold a hybrid event in 2020 anticipated doing so in 2021. A year later, in April 2022—and amidst a slow-growing return to in-person events—21% of respondents were planning for a hybrid option, evidencing its staying power and relevance.

The hybrid option has new importance as high inflation pushes up the price, and potentially compresses the margins, of in-person events. These same price pressures are increasing the burden on those in need. Fortunately, many donors recognize this confluence of circumstances and remain willing to help.

As you consider the ways your organization can accomplish its 2023 goals, keep these tips in mind when speaking to donors or prospects:

First, stay in touch with the community foundation team. We speak daily with donors who have their own goals, and they appreciate creatively delivered solutions. For donors expressing concerns in light of the current economy, planned giving commitments like bequests and charitable remainder trusts may be the answer. The community foundation can collaborate with your team to structure and facilitate those gifts.

Second, gifts of highly appreciated stock, whether in public or privately-held companies, remain tax-efficient for the donor and beneficial to your organization’s endowment fund. Not all stocks are down (with January 2023 indices up!) and we can help you structure these gifts.

Third, speak to both your short-term and long-term needs. If anything, the economy is cyclical. While quick and hoped-for relief is on the minds of many, longer-term needs will always be on the horizon. Thus, there is a the need for ample reserves so as not to turn away people in need. Accordingly, the community foundation can facilitate gift-making directly to your endowment fund by donors.

Lastly, re-focus on high-net-worth donors. Despite the economy’s strong recovery from the Great Recession of 2008-2010, research points to fewer donors, but larger donations. Taking advantage of this “new normal” will require nurturing and building relationships with the most impactful donors.

And by layering in hybrid events, your endowment fund can benefit from both high-touch and high-reach fundraising efforts.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  

Hello Legacy IRA, managing your board through a downturn, and tapping social media to ease fundraiser burnout

Happy New Year!  

January is the best time to start cultivating major gifts, including support for your endowment. This is especially the case during challenging economic times, and it is looking like 2023 may be one of those times. 

We’re kicking off this issue with the good news about the passage of SECURE 2.0 and the Legacy IRA provisions it includes. This presents a terrific opportunity for outreach to your donors.

This issue also covers the always-important subject of managing your board, even in a downturn, including motivating and training board members on how they can help encourage donors to support your endowment.

Finally, we’ll share a few tips for how to maintain fundraising momentum in the face of the staff shortages that are plaguing so many organizations, including making the most of your social media channels.

Thank you for the opportunity to work together.

–Your community foundation

Hello “Legacy IRA”: How the new laws can help grow your endowment

​On December 29, 2022, President Biden signed into law the long-awaited legislation known as SECURE 2.0 as part of the Consolidated Appropriations Act of 2023 (“CAA”), a $1.65 trillion-dollar omnibus spending bill.

The nonprofit sector in particular has rallied around a component of this legislation addressing a planning tool called the Qualified Charitable Distribution (QCD). You’re likely already familiar with the QCD and perhaps your organization even has received these distributions.

As a reminder, a QCD allows a donor who is 70½ or older to make an annual transfer of up to $100,000 from an IRA to a qualifying public charity, such as your organization or an endowment fund at the community foundation designed for your organization. The donor does not need to pay income tax on the distribution and, for a donor who must take required minimum distributions (RMDs) from retirement plans, a QCD counts toward that year’s RMD. Under the new law, the annual per-taxpayer $100,000 QCD cap is now slated to be indexed for inflation, which will allow taxpayers to give even more from their IRAs directly to charity. 

In addition, with the passage of SECURE 2.0, your donors now have the opportunity to make a once-in-a-lifetime QCD transfer of up to $50,000 to a charitable remainder trust (CRT) or other split-interest gift such as a charitable gift annuity (CGA) to a qualifying public charity. These components of the new law are called the “Legacy IRA” provisions. 

Here are three steps to take advantage of the new laws as you plan your 2023 fundraising strategies.

–Although the new law allows a donor to make a QCD to a CRT, that may not always be feasible because typically trustees of CRTs, such as financial institutions, require a minimum of $100,000 to establish a trust. Plus, a donor can’t use a QCD to transfer IRA assets to an existing CRT, according to the Legacy IRA rules. Before you discuss Legacy IRAs with your donors, talk with the team at the community foundation to explore the CRT options available to you, especially if you are already working with the community foundation through an agency endowment fund. The community foundation can help you with a strategy to secure endowment gifts through CRTs created under the new Legacy IRA technique.

–Consider leveling up your CGA program, starting with talking with the team at the community foundation to find out how we can help. While the $50,000 Legacy IRA cap may present challenges for donors who want to use a CRT, the CGA, on the other hand, could be a perfect fit. CGAs typically can be set up at much lower minimums than a CRT. In addition, CGAs are becoming more attractive as interest rates rise and the corresponding payout rates increase. Be aware, though, that CGAs created to receive a QCD contribution are different from other CGAs in a few important respects under the new law. For example, annuity payments are fully taxable, and must be at least 5%. Although the 5% requirement is not an issue at the moment due to the new, higher payout rates, this stipulation could present a challenge in the future. Again, the community foundation can help you with a strategy to secure endowment gifts through the new Legacy IRA technique using CGAs.

–Update your marketing materials to include language about the Legacy IRA. You don’t need to go into detail, but it is important that your website, one-pagers, newsletters, and social posts at least mention the possibility that a donor over age 70½ could support your organization and its endowment through a CRT or a CGA created using IRA assets. Reach out to the community foundation for help and ideas. 

Managing your board: Stepping up endowment fundraising in a challenging economy

It’s hard enough to engage board members in fundraising activities when the economy is strong, let alone when the economy is shaky. But a challenging financial environment is no time to ease up on managing your board of directors. As 2023 gets rolling, consider getting started right away on steps to increase board engagement with fundraising and especially endowment fundraising.

Set the tone early

Make sure that your first board meeting of the year includes a segment on fundraising and the status of your endowment, even if your endowment has taken a hit in the rollercoaster stock market. Most endowment funds are down, and it’s much better to be up front with the information than to sweep it under the rug. Everyone is in the same boat, and board members will be expecting this information. 

Inspire action

After the year-end 2022 reports are out of the way, jump into a thoughtful and confident discussion about 2023 fundraising. Share with board members that your team is prepared and geared up for an enthusiastic fundraising initiative, starting right now. While other nonprofits may be hunkered down, worried and reluctant to ask donors for money, you’re not. You know that this is a great time to show donors just how important it is to have a strong endowment to ensure that your mission stays strong during challenging economies like this one. 

Give specifics

Provide donors with information about the new Legacy IRA provisions, remind them about QCDs and gifts of appreciated stock, provide dates for upcoming events where endowment conversations could take place, talk about your relationship with the community foundation via your agency fund, and so on. Specifics like this will help board members see that you are taking decisive action to make 2023 fundraising a success. 

Ask for help

Your board members are often happy to help with fundraising but they don’t exactly know how to do it or what to say. Make it very easy for them. Start by suggesting a one-on-one conversation with each board member to discuss how they can get involved. Then, in these one-on-one settings, find out if the board member has suggestions for prospective donors you can contact or introductions they could make. One-on-one discussions are an easy way to get board members involved in fundraising without putting them on the spot in a board meeting. 

Above all, reach out to the community foundation any time. Our team looks forward to helping you grow your endowment and making 2023 a winning year for your organization and its future.

Overcoming staff shortages: Can social media help?

​The last few years have been rough for nonprofits’ efforts to retain and recruit talent. You and others working in the sector know this better than anyone. It’s been especially difficult to recruit and retain fundraising professionals. A staggering 46% are reported to be considering leaving their jobs in the next couple of years. That level of turnover wreaks havoc on even the most high-performing nonprofits.

Burnout appears to be a major factor. Especially hard hit are fundraisers who’ve weathered a pandemic, muddled through the cancellation of in-person events and meetings, faced a significant increase in the organization’s philanthropy revenue line as the community’s need for services has skyrocketed, and dealt with a donor base rattled by a volatile stock market and rising interest rates. That’s a lot! 

It may be time to consider relying more on technology–and social media specifically–to help your lean fundraising team scale its efforts. Certainly your organization already uses social media to get the word out about your mission and engage with current and prospective donors. But is there more you could be doing to leverage these free online communications tools? 

Here’s a checklist to help you consider what your 2023 social media strategy might look like:

–Review all of your social media profiles. Is the language up to date? Is the brand consistent across LinkedIn, Facebook, Instagram, and Twitter? Are the brand and language consistent with what’s on your website? As basic as it seems, many organizations’ profiles are out of sync, which causes low-level, constant, subconscious confusion and dissonance in donors’ minds. Over time, this can erode the confidence of your fundraising base.

–Spot check the followers on each of your accounts. Do you recognize the names? If there are people who are following you who are not donors, that spells opportunity. And if your existing donors are not following you, that signals an opportunity, too. Try following each of them, or including a more prominent link to social channels in your next donor communication.

–Take a hard look at your content. Is it compelling? Are the images engaging? Are you posting on each channel two or three times a week? Are you tagging people and organizations where appropriate? Ask outsiders to give you an honest opinion about your posts and listen to the feedback. Make a list of three or four improvements you could easily implement.

–Update your 2023 social media plan to address the items above and lay out a rough content calendar so you know you are hitting major issues throughout the year, ranging from events, to endowment opportunities, to celebrating mission successes and showcasing donor stories.

–Reach out to the community foundation to find out how you can add links in your social media post to your agency endowment fund at the community foundation. This could be an easy way to generate traffic and interest over time and give your team a head start on donor conversations about supporting your endowment. 

We look forward to helping you make 2023 a success! 

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Staying positive about fundraising and growing your endowment

Happy December! 

It’s the last month of 2022, and we can’t believe how fast the year has gone by.

At the community foundation, we are dedicated to growing philanthropy in our region by engaging a broad and diverse donor base. We provide tools and services to help donors establish charitable giving plans and structures to maximize their ability to support the organizations they care about–you–now and for years to come.

A crucial component of our work is helping you and other nonprofit organizations grow your endowment funds and reserve funds by providing back office services to handle the administrative side of these funds so you can focus on your mission, fundraising, and engaging donors. For example:

–The team at the community foundation is adept at navigating the specific accounting standards that are unique to endowments, reserve funds, and donor-designated funds. 

–The community foundation team can help you establish investment policies and gift acceptance policies, making it easier for you to engage donors in productive fundraising discussions. 

–The community foundation is committed to offering investment options that empower your organization to exercise outstanding stewardship of the funds donors have entrusted to your board and staff to support your organization’s mission. 

–The community foundation’s staff is familiar with a wide range of planned giving structures and techniques and can serve as a sounding board for your fundraising efforts.

We look forward to working with you as 2022 draws to a close and as you pursue your mission in the months and years ahead. 

Thank you for your partnership.

–Your community foundation

Converting 2022’s daunting fundraising realities into success in 2023 and beyond

You’re not alone if it’s feeling harder to raise money as the year winds down. Late November's stock market rally may help, but it's still been a tough year.

Indeed, the team at the community foundation is here to help you maximize your efforts to grow your endowment and reserve funds, even in a roller coaster market, and also help you facilitate complex gifts where the community foundation can serve as your partner to receive transfers of alternative assets such as real estate and closely-held stock. We can even help you work with a donor who wants to give an alternative asset to benefit your organization along with other organizations. We strive to ensure that no philanthropy is left on the table as you work with donors who are passionate about supporting your mission! 

Here’s the reality we’re all dealing with in the philanthropic sector. Though 12-month results for the period ending September 30 have been encouraging for many, more recent year-over-year results for 2022's third quarter were universally down according to the Blackbaud Institute Index. It reported that organizations raising annual revenues in three ranges—up to $1 million, $1 – 10 million, and $10 million or more—experienced declines of 3.5% to nearly 5% from July to September. 

The reasons for the declines are all too familiar:

• Inflation and fears that it will continue are cutting into donors’ ability to give. Though the inflation rate is widely reported as nearly 8%, it’s likely higher for many willing to calculate a personal inflation rate based on their household’s consumption. There’s just no getting around the high cost of food, shelter, energy and transportation. 

• Covid repercussions and threats of new strains have hampered attendance and participation at in-person events that enjoyed robust turnouts through 2019. While in-person events are making a comeback, attendance is still not back to pre-pandemic levels.

• Broad stock market declines of 20% or more have reduced the number of appreciated stocks that have traditionally been a gifting source for those donors who’ve benefited from the gains, and people are still feeling the sting even with the recent stock market rally.

• Fears of recession have grown from “maybe” to “likely” in the minds of many economic analysts as the year has progressed. 

• Job insecurity, amplified by weekly news of layoffs, may be rattling donor confidence, particularly in the tech sector. 

All that said—nonprofits, the people who run them and those who support them—are, by definition, an optimistic bunch. In good times or bad, we believe that better days are ahead, filled with hope and promises of progress.

And there are reasons to be hopeful!  

Year-over-year fundraising results for the 12 months ended September 30, 2022 were encouraging despite concerns about third quarter results. Blackbaud reported increases of 6.4% - 7.7% for all organizational size categories. For medium and large-sized nonprofits, online fundraising grew by more than 5%. Reaching more donors via digital channels offers broad opportunities for new and sustained conversions.  

Another bright spot is that unemployment is low and steady, mirroring 2019 levels; 4.0% was recorded in January and subsequent months leveled off near 3.5% according to the U.S. Bureau of Labor Statistics. Despite inflation, earners largely have a heart for others and a willingness to help. 

As your fundraising efforts advance into year end and beyond, it's wise to know where your money comes from and diversify your fundraising. Apply the same logic to your fundraising as you do to your retirement savings account and avoid reliance on any one tactic in particular.

To that end, now is also the time to take a closer look at your endowment and reserve funds and continue to raise the subject of bequests, planned gifts, and endowment gifts with your donors.

If you've already established a legacy society, evaluate what you can do to deepen legacy donor engagement. Review your list of legacy donors and dates of last contact and look for patterns. If it's been more than a year since you talked with a legacy donor, make a plan for personal outreach in the first quarter of 2023. While it's true that most charitable giving occurs during the fourth quarter, the beginning of the year can be an excellent time to talk with donors about planned gifts and bequests. Many donors set goals at the beginning of each year to update estate plans, so that's a perfect time for your organization to be top of mind. If your organization has not yet established a legacy society, now may be the time to do it.

Remember, when you are working with legacy donors and their advisors. make sure that any legal documents related to a planned gift not only properly name your organization using its exact legal name and, ideally, location, but also include protective language such as "and its successors" in case your organization ever merges with another entity. Reach out to the community foundation for assistance with complex cases; frequently a designated fund at the community foundation can meet both your organization's goals and your donor's goals while ensuring that the donor's intentions are not thwarted by future, unforeseen legal issues.

The net-net? If you’re experiencing the frustrations of fundraising, a good remedy may be to find the hope that you want donors to see in your own organization, especially as you communicate to donors that your organization is here for the long term and they can be an integral part of ensuring its future by supporting your endowment.

Year-end reminders for your donors

Encourage donors to review their stock holdings

Even though 2022’s rough stock market may still be a concern, late-year rallies may help. Chances are not all of your donors’ holdings have had an unusually down year. Gifts of appreciated stock is still one of the most tax-savvy ways for donors to support your organization because capital gains tax can be avoided on the appreciated stock. 

Donors over 70 ½ should consider a Qualified Charitable Distribution

A Qualified Charitable Distribution (“QCD”) is a very smart way to support charitable causes. If a donor is over the age of 70 ½, the donor can direct up to $100,000 from an IRA to a public charity like your organization. If a donor is over the age of 72, a QCD can count toward the donor’s Required Minimum Distribution (RMD) for the year. That means the donor will avoid income tax on the distributed funds. Ask your donors to consult their tax advisors to go over the rules for QCDs and evaluate whether the QCD is a good fit.

Remind your donors to watch the calendar

Be sure to remind your donors that certain steps must be taken to complete gift transactions during this tax year, including making sure that checks to your organization are postmarked or hand-delivered to your office no later than December 31. Gifts of marketable securities also need to be fully transferred by December 31, so make sure your donors contact you in plenty of time for you to process and receive the transfer.

Getting creative, GivingTuesday, and exercising endowment caution

Greetings from the community foundation! 

Giving season is upon us. We know 2022 has been full of challenges and surprises! The team at the community foundation is always happy to serve as a sounding board for all things charitable giving, especially when it comes to thinking about how to grow your endowment or reserve funds even during volatile economic times.

In this issue, we’re covering innovative ways to approach your fundraising, from making the most of GivingTuesday, to encouraging donors to give “alternative” alternative assets, to resisting the temptation to dip into your reserves.

We are grateful for the opportunity to help you inspire your donors, structure complex gifts, and implement strategies to grow your rainy day funds and long-term assets.

Thank you for your partnership.

–Your community foundation

Building your endowment: Is it time to get creative?

The team at the community foundation is committed to helping nonprofit organizations in our community identify savvy ways to inspire donors to make endowment gifts, especially in challenging economic times. Indeed, helping you facilitate gifts of unusual assets is a service the community foundation loves to provide.

When you (and your donors) think about “unusual assets,” real estate and closely-held stock may come to mind first. Those assets can make excellent gifts to charity. But don’t forget about gifts of intellectual property such as royalties, patents and trademarks, which, under the right circumstances, can be strong contenders among the wide range of options for a donor to give to your endowment. 

The community foundation can help you, your donor, and the donor’s advisors identify the tax rules associated with gifts of intellectual property. For starters, you and your donor will need to take note of what’s known as the “fruit of the tree” principle. In short, this rule means the IRS will not allow a taxpayer to give away an asset's income–and the corresponding tax liability--without the taxpayer also giving away the asset itself.

Valuation is also an important consideration with gifts of intellectual property assets, just as it is with any hard-to-value asset. Before your donor gets too far down the road with giving a patent, for example, it is crucial to understand how that gift will be valued in the eyes of the IRS and to what extent it is considered long-term capital gain property. 

Here’s the takeaway: Talk outside the box. In your conversations with donors about year-end gifts this season, ask a general question that might open up new sources of philanthropy. A possible conversation starter: “Do you own any patents, trademarks, or other intellectual property? Many donors are exploring how to structure gifts of these assets, especially as the stock market continues to present challenges for making traditional gifts of securities.”

Even if a donor is not ready to part with the intellectual property itself, the donor–an author, for example–might be open to directing honorariums to your endowment fund at the community foundation. While honorariums are still considered taxable income to the donor, the gesture is nevertheless significant not only in terms of the actual dollars, but also as a way for the donor to publicly show support for your organization’s future and inspire other donors to support your endowment, too. 

Our team looks forward to hearing about your giving season conversations. We are always happy to help! 

Make your GivingTuesday campaign a journey, not a destination

Though occurring only one day a year, GivingTuesday’s impact can last months and years when your organization embraces the initiative as a meaningful way to engage both new and existing donors. 

As you prepare for GivingTuesday on November 29 this year, as with any campaign, it's smart to think long term. Fortunately, the immersive nature of GivingTuesday in the media presents an outsized opportunity to garner support from not only existing donors, but also to bring new donors to your organization. 

Successfully transitioning GivingTuesday donors from making an initial gift all the way to considering an endowment bequest or planned gift requires a holistic approach. Your campaign will likely begin with any or all of direct mail, email, text, social media or tried-and-true phone calls. Many communications can be customized to acknowledge a prior year GivingTuesday gift or include a nudge to repeat. 

And while a monetary donation is the goal, it’s really only a start. To continue the engagement process, show immediate and continuous—but well-timed and heartfelt—gratitude. Because many GivingTuesday gifts are made online and spontaneously, digital “thank yous” work well using these channels: 

–A thoughtful acknowledgement or receipt sent by email, specific to GivingTuesday in words and imagery. Add a reminder message of the day’s significance and total results for your organization. 

–A social media post that updates the campaign progress (while still respecting donors’ privacy). 

–A personalized text message that is direct and to the point. (Make note of donors who reply STOP. Ignoring that ask can invite future pushback or alienation.)

–A campaign wrap-up message that reports results and reminds how the gift may be used.

–An end-of-year update reinforcing accomplishments and forecasting the upcoming year’s challenges and opportunities. 

Certainly, following your GivingTuesday efforts, new donors will fall into these and other standard campaign efforts; indeed, post-GivingTuesday presents a nurturing opportunity for long-term success. Consult the team at the community foundation for help and expertise to build endowment or reserve funds that go beyond the funds needed for current operations. It is never too early to begin inspiring a new donor to think about supporting your organization’s ability to provide services for generations to come. 

Tapping into your endowment is risky business

Just as market declines, inflation and job worries have individuals considering their overall resources as potential spending sources, your organization and other nonprofits may be doing the same as you seek to meet the community’s increasing needs in a cautious and concerning environment. 

Rightly so, the quantitative penalties, such as 10% for retirement account withdrawals before age 59.5, give many individuals pause. So does the prospect of selling devalued assets in a downturn, which individuals know can compromise or undermine their long-term savings goals. Your instincts may be telling you that your organization’s endowment fund, similar to your own stock portfolio and retirement funds, perhaps also ought not to be disturbed no matter how bad the cash crunch may get. Your instincts are correct: Endowments must be handled with care. 

For nonprofits, the penalties or considerations that accompany accessing endowment funds are potentially harsh. As your colleagues and board undoubtedly understand, this is because of the restrictions set by donors or by the board itself. That is why it is so important to carefully craft and review donors’ gift instruments; that is, the documentation that can include both the solicitation (how your organization intends to use the funds) and also the restrictions spelled out by the donor. If you’ve established an endowment fund, you are certainly aware of the risks associated with ignoring the all-important notion of “donor intent.” If a donor intends for a gift to be invested in an endowment, and that intention is well-documented, your organization must respect those wishes. 

So, during the giving season this year, rather than spending time and effort defensively, why not go on the offensive by redoubling efforts to obtain new, renewed or increased gifts? Time and time again, in both nonprofit and for-profit spaces, organizations have reduced or shuttered their outreach, marketing or advertising in questionable times, only to later realize that those areas should have been fed, not starved. 

Despite the times, capable and impactful donors remain viable. Further, reaching them by phone call or letter with a warm and genuine ask is inexpensive, and has high potential. Other communications tactics can be adjusted, and to paraphrase an age-old maxim, it’s easier to get gifts from existing donors than new ones. 

By making more asks, not fewer, and by resisting the temptation to access your endowment or reserve funds, your team might be pleasantly surprised by the level of funding you are able to secure to continue delivering on your mission and serving the community. And, chances are, you’ll be building an even larger and more loyal donor base than you had before, thanks to the unexpected opportunities you’ll discover along the way. 

Feeling that pinch: Fundraising food for thought

Times are tough! Your organization is facing fundraising challenges on multiple fronts:

–Inflation is increasing the costs of delivering your mission, which means you have to raise more money just to maintain the same level of service. 

–At the same time, the communities you serve are relying even more heavily on your services because of their own financial struggles. 

–What’s more, the value of your endowment or reserves has likely declined alongside the stock market, which means the income you rely on from these assets is lower.

–To top it all off, your donors themselves are feeling the heat of economic turmoil, which makes fundraising even harder.

That’s a lot! 

The community foundation is here for you. In this newsletter, we hope to offer ideas and inspiration to help make your work easier, even if just by a little.

We appreciate the opportunity to work with you as you grow your planned giving program, endowment, and reserve funds to make our community a better place through the good times, bad times, and everything in between. 

Take care,

–Your friends at the community foundation

Feeling that pinch: Fundraising food for thought

The daily news may not be offering overwhelming hope for a productive giving season, but that shouldn’t stop you from charging ahead with plans to secure the philanthropic resources your organization needs to carry out its mission. Here are three ways you can take action.

First, stay in touch with the team at the community foundation. Every day, we are talking with families, individuals, and businesses about their charitable giving goals, and we help develop creative ways to meet those goals even during tough economic times. As you meet with your donors, listen closely for the desire to give tempered by hesitation in light of the wild stock market and inflation. Donors who are feeling this tension may be good candidates for planned giving commitments such as bequests and charitable remainder trusts. The community foundation is happy to help structure and facilitate those gifts alongside your team. 

Second, keep talking about stock gifts. We mention this a lot, for good reason! Giving appreciated, long-term capital gains property is extremely tax-efficient for the donor, which can translate into a bigger gift to your organization. And despite Wall Street’s woes, not all stock is down. Plenty of donors still hold highly-appreciated publicly-traded stock, and many donors own highly-appreciated private company interests. The community foundation can help you structure gifts of either of these types of investments. 

Third, don’t ignore your endowment. It may seem counterintuitive, but sometimes an economic downturn is the best time to start talking with donors about major legacy gifts to your endowment or reserve fund. When everyone is feeling the pain of the economy, it may be easier for donors to empathize with your organization’s need to have plenty of reserves on hand to ensure that in future periods of hard times, you will not need to turn away people who need help. Talk with the team at the community foundation about how donors can make gifts directly to your endowment fund at the community foundation.     

Refining your focus on high net-worth donors

Research shows that the number of donors is declining, while the size of donations to charities is increasing. This “dollars up, donors down” phenomenon is, on one hand, unsettling, but it does present opportunities for your organization to zero in on building relationships with key donors who can truly transform your programs and significantly boost your endowment or reserves. 

Here are three common-sense ideas for refining your focus to activate key donors:

Warm up your “Hot 100”

Build a “Hot 100” list of your donors who have the highest potential for arranging a planned gift, regardless of today’s economic circumstances. Certainly your donor list is much longer than 100; the discipline of selecting only the top 100 forces you to prioritize and focus. Include each donor on your Hot 100 list for a specific reason. For example, you’ll want your Hot 100 list to include donors who own real estate that continues to go up in value, donors who own businesses in industries that are doing well right now (pharmaceuticals, for example), and donors who serve in high-income corporate and executive roles whose compensation is unlikely to significantly decrease despite poor economic conditions. 

Activate your inner discipline

Review your Hot 100 list daily by yourself and at least weekly as a team, identifying natural points of communication (e.g., forwarding a mission success story, meeting up at a community event, dropping a note for a birthday, etc.) Of course, you are already doing these things as part of your normal donor cultivation. What’s different about the Hot 100 approach is that you are reviewing your top prospects every single day and looking for opportunities to connect. 

Adopt a “Meaningful Conversations” methodology

Consider utilizing the “Meaningful Conversations” method to cultivate these donors toward a planned gift. In this situation, a “Meaningful Conversation” is any interaction between your organization and a Hot 100 donor that materially enhances your organization’s relationship with that person, making that person more likely to work with you on a planned gift within the next 12 - 18 months. By tracking the activity (i.e., each Meaningful Conversation), you are focusing on relationship-building activities with key donors without getting hung up on closing a short-term gift. A series of Meaningful Conversations with a key donor will begin to pay off over time, especially as the economy emerges from its slump. You not only may find that your planned giving success rate increases, but your annual giving success increases, too, throughout the course of these authentic relationship-building activities.  

As always, please reach out to the team at the community foundation for assistance with planned gifts, gifts to your endowment or reserve fund, or any situation where the donor may be more likely to give if the community foundation is involved as a facilitating third party. 

Quick tips and updates

Rising interest rates and charitable gift annuities–a winning combination?

Clearly, your donors’ charitable giving priorities are impacted by interest rates. Charitable components of your donors’ estate and financial plans are no exception. For example, charitable gift annuities are becoming more attractive to donors. Thanks to the recent increase in rate of return assumptions for charitable gift annuities, this planned giving vehicle is now more attractive to people who like the idea of a higher payout rate for their lifetime annuity. 

Charitable remainder annuity trusts–also a perk with rising rates?

A charitable remainder annuity trust can be an effective alternative to a charitable gift annuity for certain donors. Indeed, creating a charitable remainder annuity trust in a high interest rate environment, versus a low interest rate environment, drives down the present value of the donor’s income stream, which means that the value of the remainder passing to your organization’s endowment fund at the community foundation is relatively high and therefore so is the donor's up front tax deduction for the charitable portion of the gift. 

More reasons to love the QCD

Qualified Charitable Distributions are already an amazing planning tool for your donors who are over the age of 70 ½. As you no doubt know, the $100,000 QCD allowance from a donor’s IRA counts toward satisfying the donor’s Required Minimum Distribution and avoids the income tax on those funds. Plus, those assets are no longer part of the donor’s estate at death, which avoids estate taxes, too. What’s more, the QCD may get a boost if the EARN Act becomes law; proposed bipartisan legislation would expand the QCD rules to allow a one-time, $50,000 QCD to a split-interest trust such as a charitable remainder trust. 

Please reach out to the team at the community foundation for help with these and other planned giving transactions. In many cases, incorporating a fund at the community foundation–whether your organization’s endowment fund or the donor’s own fund–into the strategy creates benefits across the board. You’ll also benefit from our team’s behind-the-scenes assistance to help you communicate, structure, and secure the planned gift.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

Board diversity: Understanding the critical role of inclusion in building endowments

Greetings from the community foundation! 

Before we head into the giving season, it’s wise to reflect on the reality that a planned giving program is, by definition, a long-term strategy. The key is to never give up, no matter how strong the economic headwinds seem to be. A little bit of time and effort invested each month in discussing planned giving options with donors will deliver strong returns over time. 

Once again, our newsletter’s theme is repeat, repeat, repeat. Most of us are familiar with statistics showing that a person must hear a message at least seven times before it sinks in. (It may even be more than seven!) And planned giving is a message worth repeating! Remember, planned giving transactions can be every bit as good for your donors as they are for your organization. 

What’s more, especially with so many factors in flux across the marketplace, your donors need to hear from you that nothing has changed about your commitment to building financial security so that you can continue to improve the quality of life in our community for years and decades to come. Your board and staff are in it for the long haul, and that’s a spirit you share with your donors who’ve committed to making planned gifts. Remind your donors that you value their long-term support and consider them to be your partners as you strive to fulfill your organization’s mission, every single day. 

Please reach out. The team at the community foundation is here for the long haul, too, and we are always happy to serve as a sounding board for your planned giving and endowment-building strategies.

Thank you for all you do.

–Your community foundation team

Engaging donors by demonstrating commitment to diversity, equity, and inclusion

A study released by Give.org reinforced that charities' commitment to diversity, equity, and inclusion (DEI) is important to donors. Especially as you are evaluating your planned giving strategies for your organization’s long-term health, make sure that your messaging around DEI is accurate and compelling. The diversity of our communities will continue to grow, and forward-thinking philanthropists will want to be confident that your organization is poised to effectively serve future generations.

Of particular relevance to planned giving efforts are the following findings from the study:

–Donors will stop giving if a charity’s culture is unsupportive of diversity. Of the donors surveyed, 41 percent indicated that they would stop supporting a charity if they discovered that the organization’s culture discriminates against the people it serves.

–“Culturally insensitive images and language” are also red flags for donors, and 34 percent of those surveyed said they would cut off support if they saw evidence of an organization’s insensitivity.

–Board composition is important, too. Of the donors surveyed, 17 percent said they would no longer support the organization if its board is not diverse.

The community foundation would be happy to help your team work through the diversity aspects of your planned giving program. For example, certain donors may wish to establish a field-of-interest fund or designated fund at the community foundation to provide long-term support for your organization provided that diversity criteria are met. The community foundation can serve as a neutral third party to monitor that criteria and help your organization be successful. This technique might very well help you capture a major or planned gift that a donor would not be willing to make outright. 

Tapping into donors’ entrepreneurial motivations to build your endowment

It’s not news to those of us in the philanthropy world that donor motivations change across generations. It’s relatively easy to get up to speed on the trends, but it’s not always easy to know what to do about those trends, especially when it comes to planned giving. 

One of the biggest challenges organizations face as they are building their endowments is that younger donors tend to be more entrepreneurial and hands-on, which doesn’t always align perfectly with a desire to provide unrestricted funding or endowment gifts to your organization. So what can you do? Here are three suggestions:

–Learn about the mindset. Spend a little time digging into the research and commentary–written specifically by entrepreneurs and for entrepreneurs–about charitable giving. This will help you understand the unique point of view that these donors often bring to the table when you start a conversation about major gifts and planned gifts to your organization.

–Get up to speed on gifts of closely-held stock. Many younger philanthropists have built their wealth by starting and growing companies. Giving closely-held stock to a public charity is a very tax-effective giving strategy, provided that the gift is completed well before any sale of the company is in the works. As you brush up on the rules surrounding gifts of closely-held stock, please reach out to the community foundation. We can provide insight and resources to help you navigate these types of gifts. Frequently, we can help you secure a gift of closely-held stock for your endowment or reserve fund administered at the community foundation.

–Involve the next generation. Be intentional about inviting younger donors and successful entrepreneurs to join your board of directors and committees. In this way, you’ll be able to show these emerging philanthropists, first hand, the value of the services you provide to the community and the return on investment of philanthropic dollars over the long haul. You’ll also demonstrate a strong commitment to ethics that can weather the ups and downs of the marketplace and stay committed to the organization’s mission through governance by a self-perpetuating, independent board of directors.  

Footnote: The power of an agency fund

Frequently, an organization’s board of directors is at a loss when it comes to growing an endowment, structuring and accepting gifts of real estate and other hard-to-value assets, and following best practices for establishing and following an investment policy. Happily, by establishing a fund at the community foundation, the community foundation can step in as your behind-the-scenes back office, giving your board and staff more time to focus on your programs and donors.

An endowment or agency fund at the community foundation is a powerful tool to help secure your organization’s financial future for generations to come. If your organization has already established an endowment or agency fund at the community foundation, you are well aware of the benefits. Indeed:

–Nonprofit organizations frequently establish funds at the community foundation to set aside reserves or rainy day funds.

–The team at the community foundation is adept at navigating the specific accounting standards that are unique to this type of arrangement.

–The community foundation team can help establish investment policies and gift acceptance policies, making it easier for you to engage in fundraising discussions. 

As always, the community foundation is here to help. Our tools and services make it easier for you to grow your reserve funds and endowments. We look forward to continuing to work together.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

Planned giving tips worth repeating

Don’t give up on stock gifts

It’s easy to get discouraged watching the financial news as the stock market swings up and down (and down). Remember, though, not every stock is down! This means you should not give up on talking with your donors about the benefits of donating highly-appreciated stock to support your mission. 

When a donor gives appreciated stock held for more than one year (a long-term capital asset) to your organization or another public charity instead of selling it outright, the capital gains tax is avoided. Plus, marketable securities are typically deductible at their fair market value, further helping your donor’s overall income tax situation.

Occasionally, though, even when the numbers make sense, a donor may be reluctant to give stock because of an emotional attachment to the shares. This can be overcome! Your donor can donate shares of the highly-appreciated favorite stock and then immediately repurchase the same shares in the donor's personal investment portfolio. This essentially resets the donor’s cost basis to the current price, which could help reduce capital gains taxes on a future sale.

Sometimes a donor will want to give a block of shares to support your organization as well as others. Please give us a call in situations like this. We can help your donor establish a fund at the community foundation to receive the stock gift. The community foundation will sell the stock and the proceeds will flow into the fund. Then, those proceeds can be distributed to your organization and the other organizations according to the donor’s intentions. 

QCD, QCD, QCD--repeat, repeat, repeat

You may have noticed that we mention the Qualified Charitable Distribution (QCD) in nearly every edition of our newsletter. There is a reason for that! The QCD is an elegant and effective planning tool that can work wonders for your organization and for your donors. Your donors who are required to take Required Minimum Distributions (RMDs) from their IRAs and other qualified plans still must do so even if the market is down, so don’t hesitate to raise this idea with a donor even when the stock market is making wild swings. 

As a reminder, we may see even more good news about QCDs before 2022 is over. Proposed provisions of legislation known as SECURE 2.0 would enhance QCDs by indexing the $100,000 annual allowance for inflation and adding a provision for a one-time $50,000 distribution to a charitable remainder trust or other split-interest gift vehicle. SECURE 2.0 could pass through Congress by the end of the year. 

Shell funds and building a bright future

August is national Make a Will Month, creating the perfect opportunity to reach out to donors to invite them to consider making a bequest to your organization. Your donors may be more open to setting up a bequest this year if they are hesitant to give cash or stock because of inflationary (and maybe even recessionary) pressures in the economy.

Be sure to mention a tool called a “shell fund” to donors who support your organization as well as several others. These donors may wish to leave bequests to multiple organizations, including yours. The community foundation can work with you and the donor to establish a special vehicle called a shell fund to receive a bequest after the donor passes away. The money will be distributed to your organization and the others with the help of community foundation's stewardship and oversight to ensure that the donor's intentions are followed. 

Two items of note:

–A bequest to a shell fund by way of a donor's qualified retirement plan beneficiary designation is an especially effective tool to support your organization and others. That’s because funds flowing directly to a shell fund at the community foundation from a retirement plan after the donor’s death will not be subject to income tax or estate tax. 

–Bequests are ideal vehicles to grow your endowment or reserve fund. If you’ve not yet established an endowment or a reserve fund, or if you’d like to explore ways to work with the community foundation to grow your existing endowment or reserve fund, please reach out. Our team not only can help administer and invest your endowment or reserve fund, but can also provide behind-the-scenes assistance to help you grow it. 

We look forward to hearing from you about how we can help you maximize the Make a Will Month opportunity with your donors! 

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

Avoiding planned giving pitfalls

Hello from the community foundation!

Recently, we've heard from nonprofit executives that your conversations with board members and donors have become more challenging, especially related to fundraising and planned giving. That's to be expected, given the market turmoil and ever-increasing needs in our community that you and your team fulfill every single day.

This month, we're focusing our newsletter on tricky topics that you may run across in your conversations, and we're sharing ideas for how the community foundation can help.

We look forward to hearing from you, and we are grateful to be part of a community where your organization and so many other nonprofits are improving the quality of life for so many people. Thank you.  

--Your Community Foundation

Protecting your organization’s future in challenging times

During periods of economic uncertainty, a charitable organization’s board of directors may ask more questions about the most effective ways to grow the organization’s endowment, how to structure and accept gifts of real estate and other hard-to-value assets, and how to follow best practices for establishing and following an investment policy. Sometimes even the most well-planned board meetings wind up as a venue for surprising discussions! 

If conversations about your endowment, gift acceptance standards, or investment policies are bubbling up with your board members, please give us a call. At the very least, we can offer suggestions for addressing board members’ concerns. Our team can also fill you in on the benefits of establishing an agency fund at the community foundation. Here’s why many organizations in our community have done so:

–An agency fund at the community foundation is a powerful step toward securing your organization’s financial future for generations to come. 

–Nonprofit organizations frequently establish agency funds at the community foundation to set aside reserves or rainy day funds.

–The team at the community foundation is adept at navigating the specific accounting standards that are unique to this type of arrangement.

–The community foundation team can help establish investment policies and gift acceptance policies, making it easier for you to engage in fundraising discussions. 

We’d love to help your organization navigate today’s challenging marketplace and help you build a bright future for the people you serve. 

Avoiding pitfalls in complex planned giving

As nonprofit executives, you and your team are well-versed in planned giving basics. Your conversations with donors regularly cover topics such as inviting the donor to include your organization in a will or trust, name your organization as the beneficiary of a life insurance policy or retirement account, and maximize tax benefits through lifetime gifts of highly-appreciated stock instead of cash.

But what happens when conversations with donors take a turn toward complexity? If you feel uneasy when that happens, you are not alone. You’re also not wrong to feel that way. Planned giving can involve plenty of potential pitfalls. One of many examples is that recently the IRS has caught on to a charitable remainder annuity trust technique where the donor’s transferred assets are allegedly eligible for a step-up in basis and then sold by the trust (with no recognition of capital gains). Under this dubious arrangement, with the sale proceeds, the trust purchases an immediate, single-premium annuity inside the trust. The income beneficiary of the charitable remainder annuity trust claims that only a small portion of the annuity payment is taxable income on the grounds that the rest of the payment is a return of investment. Although there likely are very few donors and advisors who would attempt to pull off a sketchy strategy like this, the IRS’s position is a good reminder for every fundraiser that the charitable nature of a transaction does not shield that transaction from IRS scrutiny. 

Indeed, the IRS will strive to unravel even the most complex transactions to discern substance over form. Transactions in which form overshadows substance are consistently frowned upon by the IRS. From time to time, taxpayers attempt to have their cake and eat it too, which was the situation in a Ninth Circuit case, Moore v. Commissioner. Here, the taxpayer’s estate plan included a clause attempting to set the amount passing to charity so that the amount would match the precise amount needed to avoid taxes. The IRS disallowed the charitable estate tax deduction on grounds that the value passing to charity was not ascertainable because of the formulas and contingencies, citing nearly century-old case law holding that transfers to a charity must be “fixed in fact and capable of being stated in definite terms of money.” 

Unfortunately, the list of potential pitfalls goes on and on. We encourage you to call the team at the community foundation anytime you are working on complex charitable planning with a donor. We are happy to serve as a sounding board, and often we can offer a solution to ensure that both your organization and the donor stay on the right side of the IRS. 

Staying tax-savvy on donor giving from IRAs

The charitable giving world is paying close attention to rumblings in the Senate as SECURE 2.0 legislation moves forward. This legislation is interesting in part because of the proposed inflation adjustment of the annual $100,000 Qualified Charitable Distribution (“QCD”), as well as a proposed one-time $50,000 QCD allowance to a charitable remainder trust or other split-interest gift.

Regardless of whether the legislation is enacted into law, the QCD is an extremely powerful planning tool for your donors who have reached the age of 70 1/2.

Not only is the QCD an excellent planning tool to facilitate direct donations to your organization, but the QCD also works well when a donor wants to support your organization and stay involved in the timing and amount of distributions. A designated fund at the community foundation is eligible to receive your donors’ QCDs, and the structure of the fund helps secure your organization’s financial future even in the face of challenges. That’s because the designated fund allows your donor to decide on the timing of the distributions from the fund, such as during your organization’s capital campaign or to support a specific program or initiative.

Please reach out for more details about how your donors can support your organization through a QCD and a designated fund. We’d love to hear from you!

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

Study up on gift acceptance policies to grow your endowment

Greetings from the community foundation!

We hope this email finds you well. With so much turmoil and tragedy in our world today, we are especially grateful for the opportunity to partner with organizations in our community and people like you who are making the world a better place.

As always, we are here for you! Whether you'd like to discuss planned giving ideas, complex gifts, or creative ways to work with your donors, we'd love to talk. We are committed to helping you grow your major gifts, endowments, and reserve funds so that your mission can stay strong for generations to come.

Thank you for your partnership.

--Your Community Foundation

Study up on gift acceptance in a volatile market and beware of “garbage in”

It’s tough out there. Your donors are feeling the impact as they watch their stock portfolios ride a rollercoaster. Unlike the situation in early 2020 when the pandemic was an easily-identifiable primary cause of market turmoil, today’s reality is that the reasons for the market’s ups and downs are multi-faceted and therefore harder to navigate. Rising interest rates, an uptick in COVID cases in some parts of the world, a still-disrupted supply chain and high inflation, Russia’s invasion of Ukraine, and even the stock market itself, which some label as “overbought,” are all contributing to a wild economic ride. 

Furthermore, for donors who’ve invested aggressively in trendy categories, the impact may be even more acute. Some once-hot SPACs, meme stocks, NFTs, cryptocurrency, and speculative technology companies are faring even less well than the mainstream market indexes.

Still, it’s no time to get bogged down in doom and gloom. Here are five bright spots to consider:

–Some real estate has not suffered the declines in valuation common today in other asset classes. This, in turn, creates an opportunity to encourage donors to give real estate assets to your endowment. Frequently, the donor is eligible for a charitable tax deduction of the fair market value of the property for a gift of real estate to a public charity. Then, when the charity sells the property, the full amount of the proceeds will remain intact for charitable purposes without reduction for income taxes. 

–Furthermore, if a donor would like a gift of real estate to benefit your organization as well as one or more other nonprofits, the community foundation can help facilitate a transfer into a donor-advised fund, from which the donor can recommend grants to your charity and to the other charities after the property sale is complete. 

–Now is a very good time to review your endowment policy, especially the policy’s guidelines for how your organization handles the acceptance of certain gifts, especially if they fall in the category of “Non-Standard Contributions” as defined by the IRS. Gifts of hard-to-value assets should not be undertaken lightly. We encourage you to reach out to the community foundation to assist in establishing a gift acceptance policy that will protect your organization and empower your fundraisers to engage in successful conversations with donors. 

–What’s more, the community foundation offers nonprofit organizations the opportunity to establish endowments and reserve funds to benefit from the community foundation’s governance and oversight, especially related to accepting complex gifts, as well as relying on the community foundation for all of the policies and administration associated with an endowment or reserve.  

–Finally, an easy way to avoid trouble with SPACs, meme stocks, NFTs, cryptocurrency, and speculative tech stocks is to be aware of potential pitfalls ahead of time so that you can be prepared to say no to a gift. The team at the community foundation is happy to talk with your team about the pros and cons of accepting certain types of property. You may very well wisely decide that speculative and unusual assets like this are more trouble than they are worth. 

Even with legislation up in the air, the QCD is already a planning tool to celebrate

If it feels as though your donors are asking more questions these days about giving to your organization from their retirement plans, you’re likely not imagining it. We know you're getting these questions, and our team is here to help answer them.

Our team will continue to keep you informed of the status of legislation impacting the popular Qualified Charitable Distribution ("QCD") allowance. More and more donors are discovering this powerful tool for supporting their favorite charities.

Here's where things stand:

SECURE 2.0 passed the House of Representatives in March 2022, and companion legislation is now under discussion in the Senate. You might find it helpful to review a brief section-by-section discussion draft released by the Senate on May 26, 2022, especially the introductory paragraphs, to see a snapshot of the legislation. 

We, like you, are watching this legislation with interest. Proposed provisions of SECURE 2.0 would enhance Qualified Charitable Distributions (“QCDs”) by indexing the $100,000 annual allowance for inflation and adding a provision for a one-time $50,000 distribution to a charitable remainder trust or other split-interest gift vehicle. 

The legislation is bipartisan with broad support but still likely will not be signed into law until later this year. That is because the House and Senate versions need to be reconciled and then the bill would need to be signed by President Biden.

Here’s what’s important, though: A QCD under the current law is still an excellent planning tool. When you meet with a donor who is 70 ½ or older, encourage the donor to work with financial advisors and take a careful look at projected retirement income. If the donor does not need to rely on IRA income (which is subject to income tax), the donor may benefit significantly from distributing up to $100,000 annually from that IRA (and thereby avoiding the income tax) directly to a “qualifying” charity, whether that charity is your organization or a designated fund at the community foundation. Indeed, a designated fund gives your donor the freedom to support your charity and other specified charities, which may help you land the gift. Please reach out to our team. We would be pleased to assist.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  

Charitable deduction rules: Hot topics in historical context

Charitable deduction: Hot topics and historical context  

Tax issues related to the charitable deduction are hot topics these days as potential tax reforms are circulating in Congress. Included in the discussions, for example, is proposed SECURE Act 2.0 legislation that passed the House of Representatives in March and is now pending in the Senate. Philanthropy advisors are closely watching this legislation, in part because a version of the proposed SECURE Act 2.0 legislation calls for Qualified Charitable Distributions (“QCDs”) to be indexed for inflation. In addition, proposed legislation would allow a taxpayer to make a one-time QCD of up to $50,000 to a charitable remainder trust or other split-interest entity.

In addition to philanthropy-related tax proposals and the variety of pending budget items that could impact tax laws, the uptick in discussion about the charitable deduction in general might be catching your donors’ attention. 

For example, a report updated last quarter by the Congressional Research Service, The Charitable Deduction for Individuals, provides an excellent overview of the history, policies, and fundamental concepts behind the income tax deduction for contributions made to charities. Just two pages, it’s definitely worth a glance if you are interested in a quick refresher course. You might even find it useful to share with donors.

Notably, the Congressional Research Service’s report estimates annual forgone revenue via the charitable deduction at an estimated $52.4 billion for Fiscal Year 2020, down from an estimated $57 billion for Fiscal Year 2017, just prior to increases to the standard deduction under the Tax Cuts and Jobs Act ("TCJA").

The TCJA significantly reduced the number of taxpayers who itemize deductions, including deductions for charitable gifts. Indeed, for Fiscal Year 2022, over 80 percent of the total charitable deductions are projected to be associated with taxpayers who earn over $200,000.

If you’re interested in deeper reading, the Joint Committee on Taxation recently released a thorough report summarizing the federal tax treatment of charitable contributions in more detail. And of course, please reach out anytime! The team at the community foundation is happy to share perspectives about potential tax law changes and their impact on ways your donors can structure charitable gifts accordingly.

Family legacies: Preserving donor intent

A bequest to a charitable organization is a tried-and-true estate planning technique. Whether a bequest is a specific bequest, a percentage bequest, or a remainder bequest, a donor's decision to include such a provision in an estate plan is a useful and popular way to support an organization like yours for years to come. Indeed, according to Giving USA, individuals gave an estimated $41.19 billion to charities through bequests in 2020, up 10.3% from 2019. 

Increasingly, though, advisors, charities, and families may find themselves in situations where the validity of a will or other estate planning document is subject to challenge. Indeed, a “draft it and forget it” approach to bequest planning is likely not sufficient. It’s wise to help your donor look at all aspects of a future bequest during the planning stages, working hard to cover all the bases.

To help ensure that a bequest goes smoothly from beginning to end, remind your donor that the best time to make philanthropic plans really is right now. By being proactive, your donor has nothing to lose and everything to gain in ensuring that charitable wishes are carried out.

Sometimes a donor wants to leave bequests to multiple organizations and therefore prefers to adopt a holistic planning strategy. In a situation like this, the community foundation frequently works with nonprofits and the donor to establish a “shell fund” to receive bequests after the donor passes away.

A shell fund allows a donor to lay out charitable intentions, including supporting your organization and other charities, to build a broad charitable legacy. A donor can name the fund, and the shell fund agreement can be modified anytime before the donor’s death. 

Please reach out to the community foundation to learn how shell funds and other planning tools can help you and your donors avoid potential future challenges and help protect your donors' philanthropic goals to support your mission.    

Public scrutiny: Capitalizing on objectivity to build donor confidence

While there are certainly aspects of the public nature of the Form 990 that can help your fundraising efforts, one of the major benefits is that the information is objective and subject to review by a third party. Certainly those themes are emerging as data and analysis becomes available concerning the impact of public information available on nonprofit organizations’ tax returns. 

Many nonprofit organizations take advantage of the community foundation’s services for that same reason, meaning that donors often gain confidence in a nonprofit organization if its assets are being managed by an independent, community-focused institution whose purpose it is to exist in perpetuity. 

For instance, a donor may wish to establish a designated fund that allows the donor to direct giving to a specific agency or purpose. Over time, the community foundation's staff manages the distributions from the fund according to the terms established by the donor.

An agency fund is similar to a designated fund, except in the case of an agency fund, the source of the initial contribution is you--the beneficiary nonprofit organization--not a donor or donors as is the case with a designated fund. Nonprofit organizations frequently establish agency funds at the community foundation to set aside reserves or rainy day funds. The team at the community foundation is adept at navigating the specific accounting standards that are unique to this type of arrangement.

In these ways, the community foundation can help you and your team instill confidence in your donors to further boost the power of the Form 990 as an objective source of information and stability. 

Please contact our team to learn more. We’d love to help! 

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  

Helping donors think globally and act locally to support your organization

Hello!

Recently we've been reminded that philanthropy is an amazing tool to improve lives, and that is especially true in times of disaster and tragedy. Whether a hurricane, fires, or a war overseas, generous donors step in. No doubt you've seen that happen over and over in our community; you and other nonprofit organizations are on the front lines and your donors support your efforts in times of need. We'll address that very issue in this month's newsletter.

As your partner in philanthropy, the community foundation is here to help you expand your donor relationships, inspire legacies to support your mission, and build your endowment to pave the way for a brighter future.

We look forward to our ongoing conversations, and we are grateful for the opportunity to work together.

All the best,

--Your Community Foundation Team

Responding to Ukraine: Encouraging donors to think globally and act locally

The war in Ukraine has certainly captured the attention of donors both here in our community and across the globe. What does this mean for your organization? It's actually a great opportunity to expand your dialogue with donors and potentially increase their support of your mission.

When you validate your donors' overall philanthropic efforts, you are signaling that what they are doing--for your organization and for others--is making a difference. This, in turn, leads them to be more open-minded about ways they can support your organization, whether through annual giving or planned giving, or both.

As you meet with donors this spring about supporting your organization, ask them if they're supporting Ukrainian relief efforts and, if they are, ask what's motivating them. According to research reported in the Nonprofit Times, multiple factors are prompting Americans to donate to support war relief efforts. Top areas of concern are medical support, children’s issues, and short-term humanitarian aid. Supporting long-term needs is also a motivator, including focus areas such as rebuilding Ukraine, refugee support, mental health, and democracy. You will learn a lot by listening to your donors describe their own reasons for giving, providing clues for fostering deeper engagement with your work.

Indeed, conversations with donors about their support for Ukrainians opens the door for you to describe the needs you're addressing right here at home. Ensuring access to education, providing social services, preserving important works of arts and culture, researching cures for diseases, or whatever your organization's focus happens to be, there are strong parallels to the needs of humanity across the board. Many Ukrainians lack food, clothing, and shelter, for example, which unfortunately is also the case with some people in our community.

Furthermore, as your donors are making immediate gifts to support Ukrainian relief efforts and perhaps adjusting their annual giving budgets accordingly, it is a perfect time to discuss planned giving options. Your donors will want to ensure that your organization is prepared for whatever the future may bring, right here in our community.

Finally, with so much focus on Ukraine right now, understandably, your donors may have questions about making international gifts. The tax-deductibility of gifts to international organizations has long been the subject of complicated rules. Donors must navigate a web of laws and regulations, especially if a donor decides to venture into making direct grants to organizations in the affected region. For that reason, many donors choose to give to a United States 501(c)(3) organization that is working in the affected region. (Perhaps your organization is one of them!)

Please reach out to the team at the community foundation to help with these conversations. We are happy to work with you and your donors to navigate current and future giving opportunities, including establishing planned gifts and endowment gifts to support your mission for generations to come.

Inflation and appreciation: Balancing donors' income needs with charitable goals  

With inflation on the rise, donors may be viewing their charitable giving budgets with a more critical eye. Certainly the annual inflation rate of 7.9% for February 2022 raised eyebrows! That’s a level of acceleration not seen since 1982. The ripple effect is powerful. On one hand, the price increases of gasoline, food, and housing have placed enormous stress on the budgets of your organization and others whose missions support individuals and families in need. Charitable donations are critical to closing the gap. On the other hand, your donors may feel they have less cash to give and worry that the value of their cash donations is eroding.

Consider encouraging your donors to make gifts of highly-appreciated assets, such as stock that is holding its value even through these turbulent times. Giving highly-appreciated stock remains one of the most effective ways your donors can support your organization. That’s because when a taxpayer gives stock to a public charity, the capital gains tax is avoided. Plus, marketable securities are typically deductible at their fair market value, further helping a donor's overall income tax situation. The team at the community foundation is happy to help you with these gifts.  

Legislative update: Tax law changes are swirling 

This spring, there is certainly no shortage of proposed tax law changes in the works. Recognizing that it is impossible to predict when, or if, any proposed legislation will become law, we are watching developments that could impact your donors' philanthropic plans.

As far as a general direction is concerned, the White House's Fiscal Year 2023 budget proposal lays out several revenue-generating components, some of which are tax provisions similar to those in the stalled Build Back Better legislation. Your donors may be interested in the proposed 20% minimum tax on high-income individuals, slated in the proposal to become effective for tax years beginning in 2023, which is referred to as the “Billionaire Minimum Income Tax.” The tax would be applied to the total income, defined to include unrealized capital gains income, of any taxpayer whose net wealth exceeds $100 million.  

Your donors may also be interested in the Securing a Strong Retirement Act of 2022 (House Bill 2954, known as the SECURE Act 2.0), passed by the House on March 29. Among many other provisions related to retirement plans, SECURE 2.0 allows taxpayers to make a one-time election for a qualified charitable distribution of up to $50,000 from an IRA to a charitable remainder trust or charitable gift annuity. This is another way your donors can support your mission through a planned gift.

As always, the team at the community foundation is happy to help you structure charitable remainder trusts, planned gifts, and endowments. Please reach out!

How the economy affects your donors' support

Greetings!

Certainly we are living in interesting times. The work of nonprofit organizations in our community grows more important with each passing day. As we reflect on global events with gratitude for the strength of our own society, we nevertheless are struck by the significant challenges experienced by the people of our own towns and neighborhoods.

As your partner in philanthropy, the community foundation is here to help you expand your donor relationships, inspire legacies to support your mission, and build your endowment to pave the way for a brighter future.

We hope you'll give us a call with your questions about this month's newsletter topics, and anything else that comes to mind as we work together to grow philanthropy in our region.

All the best,

--Your Community Foundation Team

Is it time to talk with your donors about giving retirement assets to support your mission?

The Covid era is sometimes referred to as the Great Resignation because of the large number of people who have exited the workforce in the last couple of years. Some are referring to this period as the Great Retirement, considering that, as Goldman Sachs estimated, more than half of the people leaving the workforce are over the age of 55.

While certainly the shrinking workforce can present challenges for the economy, there may be a silver lining for charitable giving. More retirement means more money in motion, from 401(k)s rolling over into IRAs, to retirees being motivated to ensure that their financial and estate plans are in good shape, including the ability to fund charitable priorities.

All of this means it’s a great time to review the various ways your donors can gift retirement assets to your organization, even if you are generally familiar with the techniques. Here’s a quick checklist:  

–Cashing out. Of course, a donor can always contribute retirement assets (IRAs, 401(k)s and 403(b)s) by simply cashing them out and paying the income tax, and then donating the rest to your charity. Almost certainly, though, in most cases, this is not a good tax strategy whatsoever. 

–Gifts upon death. When a donor designates your organization as the beneficiary of retirement plans, the donor can potentially reap huge tax rewards in terms of avoiding estate taxes and income taxes attributable to the retirement assets.  

–Lifetime gifts. The Internal Revenue Code contains special provisions for “Qualified Charitable Distributions” that may allow a donor who is over 70 ½ to give up to $100,000 from an IRA directly to your organization and avoid paying income taxes on the distribution.

–Avoid “gotchas.” Remember that some donors may not stay retired. Going back into the workforce presents unique challenges, such as the tax implications of “rehiring” and its impact on Qualified Charitable Distributions.

As always, the team at the community foundation would be happy to work with you and your donors to facilitate these gifts. Frequently, creating a fund at the community foundation to receive, administer, and distribute non-traditional assets is a great way to help your donors unlock the funds they'd like to give to support your mission, sooner rather than later. 

Economic and policy trends may influence your donors’ giving plans

Like you, we’re keeping a close eye on policy and legislative developments, as well as the impact of the economy on charitable giving strategies. Here’s what we’re tracking:

–Taxpayers have been using cryptocurrency to fund their charitable goals. This is certainly a strategy worth exploring for some of your donors. Be aware, though, that the IRS’s commitment to increased enforcement, coupled with the purported widespread underreporting of cryptocurrency-related income and corresponding tax revenue losses, means your donors should proceed with caution, especially now that the IRS has launched Operation Hidden Treasure to combat crypto fraud.

–Your organization, along with other charities, is impacted by inflation. Your donors may wish to take that into account in their charitable giving plans for 2022. Even though your donors may themselves feel less flush with cash, the charities they support are feeling it, too, and a decline in donations might seriously crunch the budgets the organizations require to deliver on their missions to help the people who need it most. 

–Despite somewhat dire predictions that philanthropy might decline due to pandemic forces, that did not happen, according to a recently-released study. Charitable giving grew by nine percent in 2021, driven in no small part by online giving. Average gift amounts were up, although the number of donors giving to charity is still experiencing downward pressure due to the change in the rules for itemizing deductions.

–Certainly, your donor relations team is accustomed to dealing with donor divorces as marriage and divorce rates ebb and flow. The topics of philanthropy and divorce haven’t typically been addressed together, though, at least not until recently when high-profile divorces such as MacKenzie Scott and Melinda French Gates have highlighted the billions of dollars given by these women to charitable causes. Today’s environment of heightened awareness means it’s a good time to brush up on the legal, financial, and tax impact of a marital split on donors' charitable strategies. The team at the community foundation is happy to help you strategize when you are dealing with a donor couple, especially when both partners have been giving to your organization for a long time.   

Tapping the emotional side of giving

Greetings!

The team at the community foundation is honored to help our nonprofit partners grow donors’ legacy giving and build endowments. 

In this month's newsletter, we highlight two issues to watch as 2022 gets into full swing: How to leverage the emotional components of endowment fundraising, and how to navigate increased public scrutiny and IRS enforcement (yikes--but we are here for you!).

As always, the community foundation welcomes the opportunity to be your partner as you grow your donors' gifts. Please reach out anytime.

--Your Community Foundation Team

Maximizing legacy giving’s emotional components  

During annual fundraising campaigns or other initiatives to raise current dollars, many philanthropy professionals rely heavily on the emotional components of their interactions with donors, such as the human needs being served by the nonprofit’s programs and stories of successful outcomes. This focus is wise because research tells us that emotional intelligence is critical to successful fundraising.   

By contrast, philanthropy professionals frequently lean toward approaching charitable gift planning as a mostly rational exercise, probably because of the heavy tax and legal components involved in structuring trusts, bequests, foundations, donor-advised funds, beneficiary designations, and so on. Indeed, it’s critical to nail those tax and legal components to ensure that a donor’s charitable intentions are carried out in a financially-savvy manner.

But the emotional side of charitable gift planning is powerful and should not be overlooked. Any type of giving delivers psychological benefits to the giver. Think about the notion of an endowment gift. Its permanence can create a sense of immortality that is very important to the donor. What’s more, the donor’s values live on through the types of causes they support through legacy and endowment gifts, especially if the gift instrument clearly defines the donor’s intent and the impact the donor is hoping to achieve. Finally, many donors feel that making an endowment gift, especially through a bequest, is a fitting way to culminate–and in some ways make permanent–a long history of annual giving to an organization.   

The key for nonprofit organizations is to balance the emotional and the rational during the legacy fundraising process. Engaging donors’ hearts and minds will lead to more success than cultivating an endowment gift using only one or the other approach. Sometimes it’s hard, though, to balance both parts of the conversation. That’s where the community foundation can help. When your organization has established its endowment or other legacy fund through the community foundation, our team can work alongside your team to cultivate endowment gifts. We’ll bring the tax and legal considerations to the table so that you can focus on tapping into the donor’s emotional desire to make a meaningful gift that lasts well beyond the donor’s lifetime.  

What do increased IRS enforcement and public perception mean for your endowment-building efforts?

Increased IRS enforcement has been included as a major revenue component in various iterations of the proposed (and now stalled) Build Back Better Act. It remains to be seen what this legislation ultimately will include when (and if) it becomes law. Nevertheless, the IRS is already discussing its enforcement focus in what may be an emerging era of renewed energy for tax collection. In particular, the IRS has noted that it will be hiring more enforcement personnel specifically in its Tax Exempt & Government Entities division. At the same time, donors continue to read mainstream media stories about bad actors in the charitable world, and overall public trust in nonprofits continues to be shaky.   

For nonprofit organization leaders who are intent on growing their endowments, the current environment is stressful. Fundraising and building an endowment have never been more important to preserving your organization’s mission, and the last thing you need are IRS enforcement and public trust headwinds! 

The community foundation can help. By working with the community foundation to manage your endowment, you are adding an extra element of credibility to instill even more confidence among your donors. The community foundation is an independently-governed nonprofit organization that is dedicated to philanthropy in our region and committed to helping nonprofits improve the quality of life for the people they serve. Our team can help ensure that the i’s are dotted and the t’s are crossed so that you can fundraise with confidence and build a healthy endowment based solidly in donor trust.  

Securing legacy gifts: Art, science, and always under construction

Messaging to secure legacy gifts: More art than science

As professionals and fundraisers, your team’s communication skills are top notch when you’re talking about your mission, programs, and the funds needed to fill the immediate gaps. But it’s sometimes hard to master the nuances of talking with donors about investing in your organization for the long term.

Whether you’re discussing a charitable remainder trust, bargain sale, designated fund, or endowment gift, securing a legacy gift through a complex charitable transaction requires a multi-step dialogue with the donor. Of course, you can call the community foundation team to help you with legal and tax aspects of the gift while the mission part of the ask thrives in your capable hands. 

Here is a four-step process that can help you land large legacy gifts in 2022.  

Affirm your donor’s choices

Donors want to give to the aspects of your programs that are important to them. Further, they want to be acknowledged for their contributions no matter how big or small. It’s simple to put donors at ease when you start the conversation by thanking them for their gifts to date and then confirm that they’ve made giving choices that are much appreciated by your organization as well as the people your organization serves. This is an ideal conversation to have in January, so pull up records of past gifts and start reaching out to donors to share your organization's positive results. 

Offer your donors opportunities for education

As the year progresses, find creative ways to keep your donors informed about your mission and your team’s accomplishments. Remember also that donors want to stay ahead of the curve on tax law changes and the latest giving trends. The community foundation can help you stay up-to-date on hot topics such as the options available to donors if they have stock or land to give, for example, or the latest news out of Washington that might impact giving. Ongoing education can go a long way to increasing your chances of landing a large legacy or endowment gift when December rolls around.

Inspire your donors

Those late spring and summer months are an ideal time for storytelling. Tax issues are not weighing heavily on donors, nor are donors yet gearing up for year-end gifts. It’s a good time to create and share a few case studies (with donor permission, of course) involving real donors who have made large, complex gifts to your organization and the positive impact of those gifts on real peoples’ lives. Maximize these stories in your social media posts, donor communications, press releases, and event talking points. Donors love learning from each other.   

Motivate your donors

When fall rolls around, you will be ready to motivate your donors by appealing to their desire to pass along the importance of giving to their children and grandchildren. A donor can launch a multi-generation legacy by making an endowment gift, by structuring a designated fund at the community foundation to support your nonprofit, or by creating a charitable remainder trust. The community foundation team can support you as you help your donors make important decisions to ensure that the family’s next generation will stay involved with your nonprofit in the years and decades ahead. 

Always under construction

“The best time to plant a tree was 20 years ago. The second best time is now.”

– Chinese Proverb

No matter how many times we’ve heard that quote, we’re always struck by its wisdom. In that spirit, the team at the community foundation strives to make it easy for you and other nonprofit organizations to establish, maintain, and grow your endowment at a reasonable cost and with the planned giving support you need.

If your organization started its endowment 20 years ago (or less), it’s a good idea to review your gift acceptance policies, investments, planned giving programs, fund accounting policies, and recordkeeping systems. A lot can change in two decades–and even in just a few years. The team at the community foundation would be happy to review your current endowment and suggest ways it might better serve your mission, including exploring whether the community foundation might be a fit for your investment or legal structure. Regardless, we’re always here to help you navigate gifts of real estate, closely-held stock, or other hard-to-value assets. 

If you’ve not yet started building an endowment, don’t worry! The second best time to start one is now. For inspiration, we suggest these resources: 

–Debra Ashton, author of The Complete Guide to Planned Giving, writes about the “quantum leap” nature of an endowment in transforming the ability of a nonprofit to protect its mission.

–The sheer magnitude of the dollars in endowments is hard to comprehend, but the billions are real! It’s a good reminder that there’s donor money out there for endowments, no doubt about it.

–Candid shares great tips on why even small nonprofits should consider setting up an endowment.

We look forward to working together in 2022 and beyond to build your organization's legacy. Whether or not your tree has been planted, we’re here for you!